Codere Online Luxembourg SA (CDRO) 2022 Q4 法說會逐字稿

Good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Codere Online Fourth Quarter and Full Year 2022 Financial Results Conference Call. (Operator Instructions). Mr. Guillermo Lancha, Head of Investor Relations, you may begin your conference.

Thanks, operator, and welcome, everyone, to Codere Online's Earnings Call for the Fourth Quarter and Full Year of 2022. Today, you will hear from our CEO, Moshe Edree; our CFO, Oscar Iglesias.

Before turning the call over to Moshe, 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 a replay and transcript of this call will be available on our website at codereonline.com, where you can also sign up for our investor e-mail alerts.

With that, I will go ahead and pass the call on to Moshe.

Thank you, Guillermo, and thank you, everyone, for joining the call.

Starting with the highlights of the quarter on Page 7, we have been able to deliver a strong set of results in the fourth quarter with an impressive 70% net gaming revenue growth versus last year to nearly $38 million, confirming the acceleration of revenue growth trend that we anticipated when providing our initial outlook for 2022.

From a mix point of view, our full year revenue was split 50-50 between sports betting and casino games versus higher 56% contribution from sports betting in 2021. We expect that the trend toward increased relative contribution from Casino will continue into 2023 and as we continue to leverage opportunities to both cross-sell our casino product to sports betting customers, but also to target and acquire higher-value customers casino.

Turning back to the fourth quarter with the significant growth in the net gaming revenue was driven by a 54% increase in our active customer to nearly 142,000 together with a 10% increase in average monthly spend per customer to EUR 88 -- to EUR 89. This growth in active customer was mainly due to Mexico, where we almost doubled our customer base.

In terms of customer acquisition, the World Cup brought a vast global audience and generated better-than-expected interest in our offering, allowing us to increase first-time deposits to 122,000 in the quarter, an increase of 90% versus the year before.

And while we stepped up our marketing spend in the quarter to over EUR 30 million and versus an average quarterly spend of about EUR 22 million. The EUR 179 average cost per new customer in the quarter was below that achieved in the first 3 quarters of that year. As we close out our first year as a public company, we have achieved better-than-expected results with a full year NGR of EUR 123 million, which is above the higher end of our guidance, which we said was between EUR 115 million to EUR 120 million last quarter.

We are particularly proud of our execution in Mexico, where we believe we have both efficiency and effectively deployed marketing spend and see significant increase in our customer base as a result. Additionally, we have experienced significant growth in Spain, with revenue up more than 20% despite the limited marketing spend due to regulatory restriction in place.

In terms of recent development, we continue to seek several licenses in Argentina, where we see potential to be magnificent and profitable business. In the Province of Cordoba, we expect to begin operation this year. We're also pursuing a licensing in the Provinces of Buenos Aires and we have recently participated in a standard process for the Province of Mendoza.

Finally, we are announcing today a change in leadership at our company. After a careful consideration and for a personal reason, I've decided to step down from my role as a CEO and transition into a new role as an Executive Vice Chairman. This position wasn't made lightly, but I feel that it is the right choice for me at this time. In my new role, I will be focusing on a number of strategic initiatives and otherwise supporting the team and where it's needed.

Aviv Sher will be taking over as CEO. He has been an integral part of the company since we started and has played a key role in our success. Aviv, (inaudible) he has worked with -- together with me for over a decade and on top for the tenure of Codere Online, he brings over 15 years of experience in the industry and has previously served as the COO of NeoGames and CEO of Prime Gaming.

With Aviv at the helm, I'm confident that we'll continue to drive and reach the highlights. This is an exciting time for the company, and I look forward to working with the team to the new role and supporting Aviv in taking his responsibilities.

I also want to take this opportunity to thank the employees for their hard work and dedication over the years. It has been an incredible privilege to lead this organization and to work with such talented and committed team. Likewise, I would like to thank to the Board of Directors and our Chairman for their help and support during the time for my time as a CEO and heading into this transition and looking forward to our closing with our Chairman again.

Last but not least, I want to express my gratitude to our investors for their support and confidence in our company. We remain committed to delivering on our promises to generating substantial growth for our shareholders.

With that, I will turn over to Oscar to cover the financial highlights of the quarter. Oscar?

Thanks, Moshe.

Turning to Page 9. Consolidated net gaming revenue grew 70% to nearly EUR 38 million in the fourth quarter, driven by our Mexican business, which more than doubled in the period to over EUR 16 million, together with a 42% growth in Spain to nearly EUR 18 million. Colombia also performed well with over EUR 2 million of net gaming revenue in the fourth quarter, 56% higher than last year.

The World Cup played an important role in our revenue uplift in the quarter, not only because of the engagement from both existing and new customers, but also because of a better-than-expected sports betting margin realized throughout the tournament. Adjusted EBITDA was negative EUR 14.6 million in the quarter and in line with our expectations given the higher level of planned investment around the World Cup, as discussed by Moshe earlier in the call.

The negative EBITDA generated in Latin America in the quarter, mainly from Mexico was partially offset by Spain, which generated EUR 3.7 million of positive EBITDA in the fourth quarter. For the full year, our net gaming revenue increased 48% to nearly EUR 123 million, almost EUR 40 million more than in 2021. From a mix point of view, Mexico represented 42% of our revenue, up from 34% last year, while Spain contributed 49%, down from 60% in the prior period.

Turning to Page 10 and taking a brief look at our P&L. The adjusted EBITDA loss in the quarter was mainly driven by the EUR 31 million in marketing investment, together with increases in other operating investments made in platform and content. We will discuss later our outlook for 2023, but as a reminder, our marketing spend is highly discretionary and can be adjusted or curtailed at any point to reduce losses and cash burn to ensure that the company has the financial resources needed to reach profitability.

Turning to the Spanish operating and financial metrics. Net gaming revenue in the fourth quarter increased 42% versus the prior year quarter despite a lower 8% increase in active customers, due to the significant increase in spend per active in the quarter. This improvement in spend per active is due in part to our growing casino business, which we believe will continue to be the driver of growth in this market.

In Mexico, net gaming revenue exceeded EUR 16 million in the quarter, an increase of over 100% year-on-year and 26% sequentially. This strong performance was driven by an impressive 93% increase in the number of active customers, together with a higher spend per customer.

Moving to Colombia. Net gaming revenue increased 56% in the fourth quarter, passing the EUR 2 million mark. Again, this was driven by a higher number of active customers, which grew 48% and together with a higher spend per customer.

Turning to the balance sheet. As of December 31, we had approximately EUR 49 million in available cash on the balance sheet, having utilized approximately EUR 42 million throughout 2022. In terms of our net working capital position, we ended the year at a normalized level of negative EUR 24 million.

On Page 16, you have further details regarding the cash flow statement and the variation in net working capital in the quarter. We have ended the year ahead of expectations in terms of cash, driven not only by better operating performance but also from a generally stronger U.S. dollar throughout the year.

That's all from my end. I will now hand it back to Moshe to cover our outlook for 2023 and closing remarks. Moshe?

Thanks, Oscar. 2022 was a year in which we deployed a significant portion from our proceeds raised in our public listing, i.e., in which primary focus was revenue growth through our significant increase in marketing investment. We believe we are successful in doing what we set out to achieve.

In 2023, however, we will slowly but surely begin shifting our focus towards profitability. This transition is driven by current investor preference for cash flow generating business over high growth, less making ones. As such, in 2023, we'll be taking our foot off the pedal somewhat in terms of marketing investment, giving priority to certain geographies over others.

With that, we expect that our revenue growth will slow in 2023 to around 20%, resulting in between EUR 140 million and EUR 150 million of net gaming revenue. But perhaps more importantly, we expect to reduce our EBITDA loss by half to between EUR 20 million or EUR 30 million. This will allow us to turn in the corner to 2024, a year in which we expect to be both EBITDA and cash flow positive, and we are comfortable that we have the balance sheet to get us there.

Let me finish my remarks by stressing again our strong performance in the fourth quarter of the year, and we believe it demonstrates our ability to execute our plan, deliver growth and we're confident that we'll be up to the task of turning Codere Online into a profitable company.

With that said, we'll turn it back to the operator to open up the call to Q&A. Thank you.

(Operator Instructions) Your first question comes from the line of Jeff Stantial from Stifel.

Let me start off by thanking. Moshe, thank you for everything in these past couple of years and, Aviv, congratulations, looking forward to working together more closely moving forward. Just a handful of questions from me here. Why don't we start off on guidance, net gaming revenue, EUR 140 million to EUR 150 million, the midpoint is about EUR 10 million below the last guidance previously disclosed, I believe, it was at Q2 earnings. Could you just talk a bit more on the drivers of variance between the 2? Is that pretty much just a function of prioritizing profitability more, the Italy sale in there? Just any color helping bridge the 2 would help on our end?

Go ahead, Moshe.

No, no, go ahead, Oscar. That's fine.

No, I was just going to say for starters on the -- just to make it apples-to-apples, the EUR 155 million would have included Italy. I think looking back at prior 3-year plans that we had, there was probably EUR 4 million to EUR 5 million of Italy in that EUR 155 million number for 2023. So I think the apples-to-apples number would be more like EUR 150 million, the high end of the range that we've put out to the market. But I'll defer to Moshe to talk a little bit more about what he's seeing in the business.

No, this is correct. I mean Italy is part of it. And the other part of it is that we are starting Argentina later than we thought. We thought that we'll be able to start working in the province earlier this year, but we won't see the impact of the revenue from the province until the third quarter of this year. So we'll have only like 6 months of revenues coming from Argentina, and that's, I think, the majority of the decrease in revenues.

Okay. Great. And then maybe just to follow up on that, just to be kind of crystal clear here. So, I guess, between those 2 you're fully accounted for, for the variance implying that any revenue impact from marketing reinvestment coming in was already contemplated in your prior guidance. Is that fair to say?

Yes. I think that's fair to say. If Argentina would have come online, if some of the other regions in Argentina would have come online earlier, I think we would be more -- we would probably be wrapping more around that EUR 150 million number, but given some of the timing delays and getting launched in other regions in Argentina versus what we would have thought, let's say, a year ago and what our expectations would have been, our objectives would have been, I think, It's a fair statement, what you just said.

Okay. Great. That's helpful. And then if I could squeeze a couple more in here. The World Cup, is there any way to kind of quantify how much of a tailwind that was during Q4?

That's probably also can -- I think that we can put the numbers better than me, but I just can say that although the World Cup was strong to everyone, not just to our brands, I know that it was strong all over the industry because it was a very successful tournament. I think that we came to the last quarter, we had a very strong tailwind from the first 3 quarters. So it's not just in the last quarter, but it definitely supported the overall year. But I think that in all -- I mean, overall in 2022, we saw that we were able to achieve the growth and the contribution per customer that we anticipated by the beginning of the year, specifically about how much the World Cup contributed, maybe Oscar can know better than me, I mean, in the last 2 months of the year.

Yes. Well, I think that in general, Jeff, the -- we were always planning on having a heavier significantly greater investment in the fourth quarter, leading up to enduring the World Cup and we did, but I think the EBITDA performance, even though the EUR 14.5 million negative is a little bit more negative than what we were tracking throughout the first 3 quarters, which was more on average, something like EUR 12 million negative. It still was better than what we were expecting.

And the last comment that I would make is that we are seeing some benefit here in the first 1.5 months, 2 months of 2023 from some of that investment that we made in the fourth quarter. It is benefiting us a little bit stronger than what we would have otherwise expected in terms of performance starting off 2023.

Okay. Great. That's helpful. And then moving to the Spain region. I believe some incremental marketing restrictions came online around year-end, is that correct ? Can you -- have you noticed any impact thus far year-to-date? Is there anything in guidance or no real impact?

Sorry, Jeff, what market? I didn't catch the market that you're referring to, did you say, Spain?

In Spain, yes.

Yes. Are you referring to the safer gambling regulation that is -- will be in place here shortly or something else?

I believe there's a couple. I think, yes, there's the one coming up, and I thought there were some other restrictions that came into play earlier this year, but perhaps those were deferred out as well.

Yes. I think the big one is really the legislation that we're expecting here probably over the next 1 month or 1.5 months in terms of safer gambling regulation. There's a number of different impacts that we'll have on our business in Spain largely that we think we will be able to mitigate. But this is legislation that will come into effect. There's some provisions that will be enforced immediately even though as I understand that there will be a 3-month grace period. The balance of the provisions established, they'll be up to a 12-month phase-in period to comply with those additional rules and requirements.

But we feel comfortable that we can -- we've been preparing for this for some time. It's some work that we've done, especially on the development front in terms of making sure our systems are prepared to manage and to comply with the new regulations. But we think that we're expecting to be able to mitigate the impact of this on our business. So that would be baked into our guidance for the year and our expectations for Spain going forward.

Okay. Great. Then if I could just close with one quick housekeeping item. Which new market launches are factored in specifically into your guidance for kind of timing to get to EBITDA profitability. And then if more markets launch, is there any way to think about implications there?

Yes, the 2 that we have in our internal planning, although are still -- both are still work in progress or really 2 additional regions in Argentina, first and probably most importantly, the Province of Buenos Aires and the second is the Province of Cordoba where we've been preawarded a license, but still working through the process to get that license issued and to get up and operating.

So those are the 2 that are -- that we have baked into our internal plan that otherwise would be contributing partially to the numbers in our guidance for 2023. Beyond that, we don't have any additional expansion markets included.

Your next question comes from the line of Michael Kupinski from NOBLE.

First of all, congratulations on your quarter and a successful 2022. A couple of questions. I was wondering if you could talk a little bit about Brazil because I know that you were thinking about entering that market and seeing some success there. But in terms of legislative issues, can you just kind of give us some update on that market and how that might play into maybe 2023 or 2024?

Mike, it's Moshe. How are you? Yes. So -- as we mentioned in the previous calls, we definitely as a Latin American brand, we are looking carefully about the market and about the legislation in the market. Obviously, there isn't any substantial development in terms of the regulation. And therefore, both in terms of the legislation difficulties and both in terms of our focus right now in the next couple of -- I would say, in the next -- in 2023, but I think that also in the beginning of 2024 to turn into cash flow positive and EBITDA positive. We will remain focusing on the core market, which is Spain, Mexico and Argentina.

Having said that, we do -- looking at what's happening in the market in terms of the transition between the different brands. We are talking to those that are operating there, and we see that the only -- right now, the only big brands that operate in the market under the [dotcom] license. They are definitely able to acquire players, but they are not seeing any -- at the moment any ROI on those -- in this investment. So it's not something that is right now at our agenda. We are in a very, very low profile looking to enter to the market maybe with a local partner, preferably a marketing agency or something that will help us to accelerate the marketing. But as I said, in the next year or so, we are focusing on the core markets.

Great. And of course, there's been a restriction of capital for a lot of companies in your industry. And they've been burning through cash. Have you noticed that the competition have kind of backed off on certain markets that you're extremely competitive in. And I was just wondering if you can kind of give us the competitive landscape? Are you seeing companies pull out of some markets and make it obviously more beneficial to you? Any thoughts there?

So we definitely see some transitions in Spain. I mean some of the brand as the legislation is getting tighter and tighter and harder to advertise. So we see reducing marketing spend, especially with those that were international brands that invested in Spain, such as William Hill and so on.

In Mexico, we see that our main competitor Caliente keep investing massively on marketing. So we don't see any reduction in that sense. But we see that the other brands side of Caliente having some challenges to grow, which is good from our sense. I mean if you're not a local brand without a local presence without the retail for the omnichannel, we see there's a challenge to grow.

In Colombia, we do see some changes in the landscape of the brands that's operating there. It's more challenging. It's a market that it's harder to create player value with more fraudulent activity. So we see that some that started last year in 2022 to invest in the market and to try to build the brand. Some of them will grow. So just to sum up to say that, I think that the good news is that not just that we are maintaining our market share. In some markets, we are increasing the market share. And we see that, that is a trend, so it's important.

(Operator Instructions) You next question comes from the line of Mike Hickey from The Benchmark.

Just a few, if you guys could -- I know you talked about sort of a more focus on profitability here. Just curious when you expect to be profitable? And how you're thinking about your cash balance. I think you ended around EUR 54 million year-end, I think you burned about EUR 46 million in cash from operations in '22. So just curious where you think you're going to end up in '23 on your cash position, how you're thinking about being cash flow positive and if you think you're going to need to raise capital here?

Mike, thanks for the question. Yes. So Mike, I think as Moshe mentioned in the prepared remarks, what we're expecting is for full year 2024 to be both EBITDA positive and cash flow positive. So that's a little bit different than maybe what we've said in the past where we've said we would be turning the corner in '24, we'd be generating positive cash flow, but really never committed to being EBITDA positive in 2024. So that is new and that does reflect a little bit the pivot toward -- on balance toward profitability versus growth.

In terms of 2023, I think the -- I would just say in terms of where we think we would end the year in terms of cash that the EBITDA guidance that we're giving is a good proxy for what we would be expecting in the year for cash burn. So depending on where you think and how we think we'll be performing over the course of the year then that's on the adjusted EBITDA front, that would be a good proxy for utilization of cash throughout the year.

Okay. And then, Moshe, I guess, you just talked about your transition here a little bit, whether or not the Board considered an external search versus internal, how that sort of shaked out? If you thought of strategic alternatives for the company at all, maybe a potential sale, I know you sold your Italian business, but just curious of the process that you and your Board went through in terms of your transition? And then as a working Chairman, it sounds like you're going to be sort of where you're going to be focusing your time moving forward?

So, yes, look, I'm with Codere already 5 years, and those were like quite tough 5 years, including the COVID-19 and the shutdown of the mother's -- company's retail and the merger and so on. And that comes after like -- another like almost like 15 years in the industry. So I thought that it's time for me to step up more for a vice president position that I will help the company more strategically than running the day-to-day operations.

And on top of that, I have a lot of confidence in Aviv and the team that I know and worked with me for -- we've been working like 10 years and more, all of the managerial team. So I felt quite comfortable that it's time to let Aviv to step up as a CEO to allow myself to work with the Chairman and Oscar about strategic about -- more about the, I would say, the overview about where are we taking this Codere Online for the next 5 years and to create value for the investors. We spoke before about Brazil, we spoke about growing Argentina. That required a lot of strategic alliances and research and looking deeper into what are the opportunities, assuming that we -- at the same time, we're trying to (technical difficulty).

(technical difficulty)

Moshe, I think you're cut out. Are you still there? Mike, are you hearing us?

Yes, I'm hearing you. It looks like we lost his audio.

Yes. I think the line is disconnected, yes.

Okay.

Mike, do you want to go on to whatever other questions you have and then what Moshe reconnects...

Yes, absolutely. Last question from us here is just any updates on what you're seeing with your consumer given the macro conditions obviously continue to be challenging, in particular, I think some of the regions that you do business. And just curious, as much as you can objectively to give us a view of what you're seeing from your players and any impact from the macro on your spend?

Yes, it's a good question, Mike. And I think that the experience that we have throughout the year, last year and especially into the back half of the year is that we were -- the investment -- the marketing investment that we were making not only helped us acquire customers and build that portfolio of customers that obviously will be benefiting from into this year, but also more importantly, I think, it's the quality of customer that we have on average, the spend per active per period pretty much across all the geographies has improved.

Some of that is mix because I think, in general, when you have, let's say, customers, even your sports first customers, but then you're crossing them over to the casino product or customers that from day 1 or more casino-focused customers that helps. So we're doing more casino business than what we have done in the past. I think throughout 2022, we did -- it was a balance. It was about 50-50 for the year between sports betting, NGR and casino NGR.

I think that trend will continue, although it won't ever get terribly disjointed.

I think we -- potentially into 2023, we may do a little bit more casino overall than sports betting. But again, it's going to be a balanced portfolio. You need the sports to drive the casino and to drive the attractive unit economics, acquiring sports first customers than crossing them the casino. But I think, to your question, we're seeing strength in the portfolio of customers that we have. We're increasing spend per active, but of course, we're mindful of both what our competitors are doing and the -- what's happening with our customers throughout these geographies, each of which is a little bit different in terms of the macro, how the macro has impacted in terms of consumer spend and, let's say, consumer habits. But so far, the -- our customers are holding up.

Hi guys, can you hear me?

We can.

Hi, Mike. Sorry, I was disconnected some.

Your next question comes from the line of Art Roulac from Three Court.

A couple of questions. In '23, if you can maybe augment the guide a little bit. What type of total marketing spend are you guys budgeting if you'll share that with us?

Hi, Art. Maybe I can jump in here. So I think we're a bit hesitant to give guidance specifically on our marketing spend, even on an aggregate or a consolidated basis, it's sensitive information, but I think it's safe to say that versus the -- what was a EUR 97 million in total marketing spend that we had in 2022, it will be materially lower than that, but it will still be consistent with the plan we set out to deliver in terms of -- especially as it relates to some of the higher growing or emerging markets where we operate or will be operating, there still will be significant investment.

So well above what we would normally consider to be a maintenance level of marketing investment. But it's not the levels that we were investing in 2022. It will be a lower amount, but we're hesitant to give a specific guide on the total marketing spend.

Okay. And then in light of the model shifting around a little bit in '23 versus '22, and I guess, obviously, no World Cup in 4Q, can you share with us sort of like the cadence from an EBITDA perspective, are losses going to be larger shrinking throughout the year? Or is it going to be more flat, et cetera?

Yes, it's a good question. We were looking at it earlier and anticipating the question. I think it's safe to say that the losses in the front half from an adjusted EBITDA standpoint will be greater than the second half, but it won't be significant. It will be a gradual decline over the course of the year. I know that in some of our larger competitors in the space they've given specific guides as it relates to, for example, what they thought they could deliver in the fourth quarter of '23.

We're not going to be delivering over the course of next year. I wouldn't expect based on how we see things today and our cadence of investment over the course of next year that we would be EBITDA positive in any of the 4 quarters, but that would be a -- there would be a steady decline over the course of the year and the first half would be bigger losses than the second.

Got it. And then in light of your sort of guidance to '24, is the thought that EBITDA would be positive in the first half of the year? Or would it be negative and then turning more positive in the back half given the full year a positive EBITDA number for EUR '24?

I think right now, we're comfortable only sharing that we will be positive for the full year. So to get into specifically what quarter do we -- are we expecting to be EBITDA positive over the course of 2024. I think that's something that possibly as we move through '23, and we have greater visibility on how the business is passing this year, we would start thinking about guiding more into '24. But the idea is that for full year 2024 EBITDA positive for the full year.

Got it. And can you share at all like the parent company, the Codere retail side of the business, how they're thinking about online, and how it fits in its capital needs going forward versus -- I guess continuing to build versus some sort of monetization?

Moshe, do you want to tackle that, or do you want me to do it?

Yes. Look, the -- as you probably know, I mean, the mother company, Codere's retail is holding around 60% of the online and they have a representative on the Board. At the moment, we are operating completely independent, I mean, financially and we're not dependent on the mother company and vice versa.

So we are running our operation in the overall business completely separately and independently of what's happening in the [Topco]. So we don't see any impact side of the relationship that we have towards the omnichannel and the platform and the services that we're getting through the service agreement with them.

There are no further questions at this time. I would like to turn the call back over to the presenters.

Thank you. So we have a few questions coming in from the webcast. I'll start. I mean, this one, we have already touched upon a little bit, but they're asking at this cash burn rate, one could see that the cash on balance sheet keeps us a little bit more of over 1 year of run rate. I understand that your marketing expenditure is somewhat discretional. What other levers besides decreasing marketing do you have to increase liquidity.

Yes, it's a good question. I think that as things stand today and given how choppy the capital markets are, I don't think we can plan around any external fund raise over the next year or 2. So that's the way we're managing this business. I think that we have the balance sheet and the cash on balance sheet to execute the plan that we have in mind for the next 2 years, and that's reflected in the guidance that we've shared for 2023. And obviously, that plan include some minimum level of cash that we would like to maintain on a go-forward basis to allow for, as is always the case, unforeseen issues in one or more markets.

So I think we have a balance sheet that we need to execute the plan. The plan is to get to both EBITDA and cash flow positive for full year 2024. And as the course of '23 goes on and we see how the capital markets and the markets in general respond. We'll see if there's other opportunities to raise capital externally. But today, our plan is focus on the resources we have on balance sheet and execute EBITDA and cash flow positive by 2024.

Okay. Another question coming in from the webcast. What can we expect for capital allocation initiatives given the economic environment and our position and the very low share price. Are any cash M&As, stock buyback plans or investments in the core business being considered as a priority?

Moshe, do you want to tackle that, or you want me to?

You can do it.

Yes, I think the focus, as Moshe said, is really on the core markets. It's really the organic opportunity that we have. We think there's -- on the margin, and I think what we've learned in 2022 is there's still opportunities, especially given that it's our home market, and it's still our largest market here in Spain. But obviously, opportunity in Mexico is we continue to see as attractive, and it's a significant opportunity. So we're going to stay focused there.

And then Argentina is really the emerging opportunity. We're going to be cautious initially in terms of the capital and the investment we make in Argentina. And once we see, especially as we're up and operating in some of the other regions outside the city once we see how those unit economics are coming in, we'll take decisions in terms of accelerating or otherwise or investment in that market.

But we're not -- I think today, it's fair to say that we're not evaluating any share buybacks or other, let's say, inorganic activities given the priorities we have and the opportunities we have to grow this business organically.

Okay. We have a few more -- in terms of reach and profitability, are there any updates on the time frame? I think, this one we already discussed. What are you looking at us on [churn] rates? Any important variations given the economic environment?

Churn rates...

Can you repeat the last question?

Yes. So, Moshe, the question was as it relates to what we're seeing in the customer portfolio from a retention standpoint or churn rate standpoint, what you're seeing? I mean, from my standpoint, I would just say that again, this is obviously information in KPI that we don't share, that's highly sensitive, and we don't share especially on a market-by-market basis. But I would say that the second half of last year, we did see improvements across our core markets in terms of retention.

I think a lot of that has to do with all the hard work especially since the business combination would have the resources and the team has been able to focus on all the things that matter when it comes to retention, which is another way of saying improving churn product, customer service, user experience. So I think there has been improvements that are reflected in the internal numbers we're seeing some of the core KPIs that we follow from the standpoint of portfolio retention and churn, yes.

Okay. And next one...

We mentioned in the presentation that we see a trend of shifting weight from the sports to the casino while we know that the casino the retention, it's longer and higher than the sports. So I think that's one of the things that we are focusing on.

Right. Yes, a good point. Next question. So around social media during the World Cup, there was some noise that the Codere app crashed while other competitors apparently didn't have these problems. What can you expect going forward around these issues? Are they being addressed as a priority? Or was it due to the high volume exclusively?

So I don't know specifically what they're referring about the app was crashed, but again, we -- I think that we specified that in previous calls that in Mexico, we're working on the Playtech platform. exactly like Caliente. So some of the issues that we had was due to massive DDoS attack that was on Playtech's third parties hosting.

So it wasn't something that was in our hand and that was recovered, and I think that they managed to recover quite quickly. Other than that, we didn't see or we weren't aware any of crash during the World Cup. So they probably refer to the DDoS attack that was on Codere's -- on Playtech's platform.

Okay. Final question. Given the planned reduction in marketing spend in 2023, what makes you confident about retaining and growing the active customers versus having them migrate to competitors?

Can you repeat please, Guillermo?

So Moshe, your question is given the reduced level of marketing investment throughout 2023, how -- why are we confident that we can continue to grow to acquire customers efficiently and continue to grow that base of active customers and maintain that spend per active. What are we doing to improve the operations of the business over the course of the year?

Yes. I don't think that we need to do any improvement in the operational side. And in terms of acquisition, we are adjusting the spend according to the capacity that we have to spend, obviously, that will have some impact on the top line revenue, but at the same time, we are entering to 2024, which -- with a much bigger customer base with a bigger market share in some of the countries. And with the proposition in Argentina, we are accelerating that market to our omnichannel strategy and sponsorship that we already have with River Plate.

So obviously, we will spend less, but we'll optimize the omnichannel strategy. We assume that -- and we have -- we believe that our overall retention program toward the countries will be more efficient just based on the experience that we have. And therefore, we believe that in terms of cost per acquisition, that will not increase -- the cost of acquisition per customer, and same apply on the lifetime spend per customer. In terms of amount of players, we definitely will acquire less players. That's for sure.

Okay. So that's it. We don't have any more questions on the phone or on the webcast. So thank you, everyone, for joining us today. And if you have any further questions, feel free to reach out to the team. Otherwise, we will speak to you for our Q1 earnings in May. Thank you very much.

This concludes today's conference call. You may now disconnect.