Codere Online Luxembourg SA (CDRO) 2022 Q2 法說會逐字稿

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Codere Online second-quarter 2022 earnings presentation. All lines have been placed on mute to prevent any background noise. (Operator Instructions)

I would now like to turn the conference over to Guillermo Lancha, Head of Investor Relations. Please go ahead.

Thanks, operator, and welcome, everyone, to Codere Online's earnings call for the second quarter of 2022. Today, you will hear from CEO, Moshe Edree; and CFO, Oscar Iglesias.

Before turning the call over to Oscar, 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.

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 this, over to you, Oscar.

Great. Thanks, Guillermo, and good morning or good afternoon to everyone joining the call before. Before moving into details regarding the quarter, let me again remind you that Codere Online is Luxembourg-based, and as a European company, our accounting information is prepared under IFRS accounting standards, and our functional currency is the euro. As such, throughout this presentation, all monetary figures will be in euro unless expressed otherwise.

Please also note that the historical consolidated income statements and accountable net gaming revenue and adjusted EBITDA figures have been moved to the back of the presentation. And we will be focusing on the quarter, year-to-date, and LTM figures in this and subsequent quarterly presentations in each case versus applicable prior-year periods.

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

Thanks, Oscar, and thanks, everybody, for joining the call. For those of you who are new to the company, I would like to provide a quick overview of Codere Online. I joined the company in late 2019 when it was a wholly owned subsidiary of Codere Group, which is a Madrid-based gaming operator, over 30 years of retail gaming operation expertise in Spain, Italy, and Latin America.

In November last year, we completed a merger with a Nasdaq-listed SPAC, which resulted in Codere Online being a US-listed business and are raising over EUR100 million to finance our substantial opportunity we ever had to grow this business, in particular throughout Latin America.

Moving to the highlights of the second quarter of 2022, we are pleased to have delivered strong operational results -- operating results in this period with a net gaming revenue up to 41% to nearly EUR29 million and 15% versus Q1 2022. This growth was driven by significant increase in average monthly active customers to nearly 105,000 and a 10,000 increase in our monthly spend per active to EUR93. Mexico, again, drove most of this growth in active customer with a 45% more in the period.

In terms of our customer acquisition, we continue to see encouraging trend as our first time deposit increased almost 47% to 85,000 at an average cost of around EUR150. Having now delivered two consecutive quarters of a strong performance, we believe that we are in a good position to meet our full-year guideline -- guidance of EUR110 million to EUR120 million of net gaming revenue. We expect that this growth will be continued to accelerate as it did in the second quarter over the second half of the year, with especially going into the fourth quarter where the World Cup should provide an additional uplift to our business.

In terms of recent developments, in early August, we applied for an online license in province of Cordoba in Argentina. This is the second most populated region in the country, and we believe that if granted the license, it could be a very good market for us. We expect that the license be granted before year end; operation to start early next year.

Finally, we took significant step forward with our sponsorship with River Plate becoming the main sponsor. Following our new agreement, we have re-branded their shirt with the Codere logo, now being placed in the front, which should give us an increased ability to improve our awareness of our brand in the country, of course, Latin America.

We also signed a sponsorship agreement with three Mexican baseball teams, Diablos Rojos, Sultanes, and Mariachis. Baseball is not only very popular in Mexico but also a popular sport among our customers who like to bet on both local league and US major league. And we expect that these alliances will help us to continue enhancing our brand in the country.

With that, I will turn it again to Oscar.

Thanks, Moshe. Turning to the financial results for the second quarter and as Moshe mentioned, consolidated net gaming revenue grew 41% to EUR29 million, driven by an impressive 85% growth in Mexico to nearly EUR12 million and an equally impressive 12% growth in Spain to over EUR14 million, exceeding the levels we had prior to the regulatory restrictions that came into effect starting in May of last year.

These restrictions impacted our advertising, sponsorship, and promotional activities. So we are encouraged to see the positive trend we mentioned last quarter for our Spanish business continue in this most recent quarter and beyond.

Colombia also performed well in the quarter with a 56% increase in net gaming revenues. And our remaining markets also contributed to the positive results in the quarter, especially Argentina, where we are currently only operating in the city of Buenos Aires.

In regards to EBITDA, please note that this quarter, we are adjusting for both a EUR0.7 million cash impact related to the cyber-related fraud that we described in our press release and a EUR1 million noncash provision related to our long-term incentive plan. As we discussed in last quarter's earnings call, the uptick in negative EBITDA versus the prior-year quarter was primarily due to the higher levels of marketing and other operational investments to drive the accelerated net gaming revenue growth we are delivering and expect to continue delivering into year end.

At the country level, the negative EBITDA generation in Latin America was partially offset by Spain, which generated EUR3.6 million of positive EBITDA in the second quarter, the highest level since the second quarter of 2020 despite the regulatory hurdles in place since last year. We have spoken with a number of you that are on this call and understand that you and the market in general are interested in having further information regarding our pathway to profitability in Latin America and overall as a company.

We are expecting to be in a position to share additional information with you in our third-quarter earnings call scheduled for mid-November once we have finalized our operating plan and budget for 2023 and updated our expectations for 2024. In the meantime, please note that this is a business where we make a significant upfront investment to acquire customers, none of which may be capitalized and which, on average, generates net gaming news of between three and five times that upfront investment over a five-year period.

In terms of the payback periods on that investment, this varies market by market, that is depending -- depends on how developed the market is and our strategic and financial objectives for that market. But generally, we seek a contribution margin-based payback between of one and two years.

On a sequential basis, however, our EBITDA declined from negative EUR13 million in the first quarter to just below EUR10 million in the second, partially due to timing issues in regards to marketing investments we made in Mexico in the second quarter. As a reminder, a significant portion of our overall marketing spend is discretional, that is can be increased or decreased at any time based on what we are seeing across our markets and our objectives as a company in terms of balancing higher growth with acceptable levels of cash burn, minimum levels of liquidity, especially concerning the current -- considering the current challenging state of the capital markets.

Turning to the Spanish operating and financial metrics, we see net gaming revenue in the second quarter increase 12% versus the prior-year quarter despite having 4% fewer active customers as a result of the promotional restrictions in place. On an LTM basis, we are 2% below in revenue levels, with 6% fewer average monthly actives in the period, reflecting the higher spend per active on the back of improved results, especially in our online casino business.

In Mexico, meanwhile, net gaming revenue reached EUR12 million in the quarter, an increase of 85% year on year and almost 20% sequentially. This strong performance is supported by both a higher number of active customers and a higher spend per active.

In regards to our omnichannel activity, our omni -- online business benefits from Codere Group's leading retail presence in the country and sizable customer database, which allows us another channel to acquire customers, offer them a differentiated omnichannel customer experience, and improve our overall return on investment in the market.

Moving to Colombia, we continue to see strong growth in the market with a 57% increase in net gaming revenue and 37% in number of actives. This continues to be a small business for us, but one that we expect to continue growing with an improved return on marketing investment.

Turning to the balance sheet, as of June 30, we had approximately EUR80 million in available cash on the balance sheet, having utilized approximately EUR11 million in the first half of 2022. In terms of our net working capital position, we ended the second quarter at negative EUR26 million, a quarter in which we did some catching up in regards to (technical difficulty) payable with third-party providers. But we continue to be a few million extended in terms of payables to Codere Group, which we expect will be addressed here in the third quarter.

On page 16, you have further details regarding the cash flow statement and the variation in net working capital in the first half of 2022. Please note that we have changed the way that foreign exchange impacts on cash balances are reflected. This is now included in the reconciliation of cash position located at the bottom of our cash flow statement as opposed to reflected as cash flow from financing.

That's all from my end. I will now hand it over to Moshe for closing remarks.

Thanks, Oscar. I just want to stress again how pleased we are with the second-quarter results, which is in many ways have been ahead of our expectations and which give us the confidence that we are on track to deliver our guidance to investors for the year. We continue to be encouraged by the potential of this business, and we're working hard to execute our plan and beginning to explore other exciting opportunities that may present themselves like the one we're currently pursuing in the province of Cordoba.

With a strong first half of the year now behind us, we hope investors will share our view that the ambitious growth rates we set out to reach of this business are achievable and that Codere Online provides investors with a unique opportunity to invest in early innings of one of the fastest-growing regions for online gaming. We look forward to speak with you again in November when we're publishing our third-quarter results.

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

(Operator Instructions) Jeff Stantial, Stifel.

Hey. Good morning, Moshe and Oscar. Thanks for taking our questions. I wanted to start off on customer acquisition trends in the quarter, if possible. You discussed CPAs came in around EUR150 per customer acquired. Looks like that's a nice sequential and year-on-year decline.

I was hoping you might just unpack that a bit more as we had contemplated more of a EUR200 or so run rate moving forward. And then as a follow-up to that, aggregate marketing spend was down sequentially both in nominal terms and as a percentage of revenues. Should we expect Q1 to be the peak in terms of marketing investment and EBITDA losses or is some of this just sort of natural ebbs and flows as you execute on your marketing plan? Thanks.

Yeah. Moshe, do you want me to take that one?

Yeah. Take it, and I will jump in if there's anything to add.

Yeah. Jeff, I think you picked up on something that clearly jumps off the page in terms of the trend from Q1 to Q2 in terms of the blended group CPA and some of the marketing spend.

Some of this is, I would say -- largely, that's driven by some of the timing issues that I alluded to my prepared remarks, specifically in Mexico, where toward the, let's say, the back half of the second quarter, we put our foot a little bit off the pedal in terms of some of the line marketing that doesn't necessarily have any immediate impact in terms of the topline revenue that we deliver.

But it did, let's say, a distortion a little bit that that blended CPA that you're seeing in terms of the acquisitions that we delivered in the quarter on a blended basis, but that's driven primarily by timing issue. So I think that some of that investment that we didn't do in the second quarter, you'll see when we come back to the market in the third quarter will have been made.

And as you say, the EUR150 is -- I think our expectations this year in terms of a blended across all our geographies, average cost of acquisition for this year was probably closer to the EUR200 per acquisition as opposed to the EUR150 that you saw in the second quarter. So I think it's largely timing differences.

Moshe, anything to add on that?

No. The way that we are calculating the CPA obviously depends on a lot of changes that it's between the proportion that we spend of above the line and below the line. And that's why there's some changes that we see, some kind of moving parts in the cost of CPA.

But I think that the main factor is that we are keeping the ratio between lifetime value and the CPA, meaning that if the CPA will go higher, we'll make sure that the lifetime -- the value of the group of the players will go higher. And then what we can do, we can just monetize in between spend that we have between any channels below the line, which is mainly digital cost per click in different platforms, Google and Facebook and so on or TV advertising. So we are monitoring that on the results.

Great. That's helpful. And maybe just to kind of reiterate the second piece of that question. The aggregate marketing spend was off 10% or declined 10% or so quarter on quarter. The percentage of revenues was down considerably about 20%, went from 90% to 70% of net revenues. Is that mostly timing with Mexico or is some of that kind of sustainable declines in your reinvestment rate as you continue to mature along in your marketing plans?

Yeah, I would say a significant part of that is timing difference. As Moshe says that there's always adjustments that are made within any given market above the -- between above the line and below line but also across markets, depending on what we're seeing at any given time and how the players that we're acquiring are performing those early months after acquisition.

So there's a mix of both, but I would say, largely, it's timing differences. In the -- I guess, in the front half, we did a minus EUR23 million in terms of, let's say, an adjusted EBITDA of EUR13 million in the first quarter, a little under EUR10 million in the second.

I think the -- looking out to the back half of the year, I think it's -- the quarterly trend will be something closer to what we did in the first quarter than necessarily what you're seeing in the second that benefited by some of that reduction in marketing spend, Jeff.

Great. That's helpful. Thank you, Oscar. Moving on to more of the competitive landscape, if you look at your -- the two largest Latin American market, Mexico and Colombia, just what are you seeing in terms of new competition coming in or existing competition ramping up or down investment in those two markets?

And then similarly in Spain, are you starting to see some stabilization of competitive dynamics? Or does it feel like operators are still pulling investment there in light of some of the well-discussed regulatory challenges?

So Jeff, in Spain, we do see some reduction in competition and have stated that that is a result of the advertising ban, in that small brand or non-brand or international brand find it more and more difficult to build any market share without any opportunity to invest in marketing or in advertising, except the post-midnight between 1:00 AM to 5:00 AM, which is not -- anyhow, it's not like a big portion of anyone's budget.

So we see that there. We either maintain or even like growing our market share. But definitely, we are growing our voice of shares in terms of the brand itself.

In Mexico, it's a bit different. We saw that at the beginning of the year. There was kind of like a trend of a small, medium operation entered to the market. We knew and we expected that in time, they will see that it's not milk and honey to or to enter into such a complicated market in terms of processing, regulation, licenses, and so on.

And then obviously, the competition with Caliente and Betcris is higher than Codere. So we saw that some of them withdrew after they were burned and spending. RushBet is getting now to the market, which we saw again that they started very strong, then they reduced their marketing.

Our main competitor still is a local brand, obviously, in Mexico; it's Caliente. They just extended now -- I don't know if it's been announced or not, but they're a private company. But they extended their sponsorship with America. So it means that they are still our competition quite well. So they are keeping their either existing sponsorship, or they're looking for a new sponsorship.

But as we mentioned in the presentation, having both Rayados and both the baseball team and both other activity that we're doing and having Real Madrid as our main sponsors in Latin America, we believe that we're not just building our brand over there; but together with the omnichannel strategy in the retail exposure, we are building slowly but as we planned our market share in Mexico. So we don't see like now any changes in that landscape, same with Colombia.

In Argentina, on the other hand, we think that we have a very good opportunity to be one of the market leaders because we do have -- as Codere, we do have the retail presence, although it's in the province, not in the city. But we're working toward to see what we can do in the province as well in terms of license. But we believe that together with Cordoba, as we mentioned in the presentation, having like the province of Cordoba, hopefully, that will get the license.

And with the city and maybe later on with the province, we'll cover like a very high percentage of the country in terms of the exposure. And we believe that there, we'll have the opportunity to be if not the market leader, one of the first three market leaders in the country.

Great. That's really helpful. Thank you, Moshe. And then if I could just squeeze in one more. On the technology front, you've been vocal that a portion of the IPO proceeds were earmarked for some upgrades to the tech stack. Could you just provide an update on where you are at in terms of some of the more discretionary improvements? And what's still left to complete moving forward?

Are you referring to the platform itself?

Correct.

Right. So as you obviously know, in Mexico, we are working mainly with Playtech as the main software provider, although we had a lot of different processing vendors and different contents that we initiate and we asked Playtech to integrate into platform.

We just finished with Playtech, a very big software upgrade of nine specs in last month. It was a complicated one, but it brought us to the level of, I would say, our main competitors in terms of all, I would say, the content and the cashier capabilities and the processing capabilities, cashing in, cashing out. So we are aligned with any other major competitor that we have in terms of the platform.

In regards to the other markets that we are maintaining and we are managing the platform with Codere Group, which they are the platform provider for Codere Online, we see strong improvement. We keep investing in that, as we mentioned in the presentation on the roadshow. We allocated budget for the software improvement.

Thankfully, in the past I would say six months, we are not suffering from any downtime, any major downtimes. And we are -- again, we are an industry standard like in a first tier industry standard in terms of the SLAs. Obviously, we have a great advantage by managing our own IP in terms of amalgamating the software like in the city of Buenos Aires; like hopefully we'll have to do in the Cordova, the province of Cordova; like we've been in Colombia and in Panama.

So all in all, we are satisfied, although we keep investing in improvements. At the same time, we started in a very low-level big project that's called the platform 2.0, which evaluates and have like an overall, I would say, thinking about where are the areas that we can either replace, improve, integrate, or buy any other IP in order to bring us to the next level of platform.

So just to summarize it, I mean, with Mexico, we're quite happy with the turnkey solution that we have from a third-party provider. The rest of the countries, we're in a good stage. There's always things to improve on the cashier side, on the player experience.

We just launched last week the Android app in Colombia. Colombia is very challenging environment in terms of the regulators and in terms of amalgamating the software, and we managed to do so. We're doing it quite well. So all in all, I think that me as the main, I would say, client of the platform, I'm happy with what we achieved, but there's still investment in the pipeline for the next quarter.

Perfect. Very helpful as always. Thank you, both. I'll pass it on.

Great. Thanks, Jeff.

(Operator Instructions) Michael Kupinski, Noble Capital Markets.

Hey. This is Pat McCann from Mike Kupinski. I had a few questions. Firstly, just wanted to touch on the inflationary environment. Are there any higher costs associated with your expansion strategy that are you causing you to make any tweaks with your strategy? Anything that you've really changed with how you're expanding the business associated with the inflation?

Yeah. Hi, Pat spoke. Okay. I think at a very high level, there are different parts of the cost structure that obviously are more impacted by the inflationary pressures across different geographies than others. But we would typically expect it's not always the case.

And especially given that we're coming off several years of COVID and economic impact in some of the geographies that we operate and somewhat weakened disposable income from certain pockets of our customers, it's not always easy to see that and to manage around and compensate through pricing, okay?

So pricing is largely -- it varies market by market but largely governed by the competitive landscape and where you're positioned within that competitive landscape and what your competitors are doing. So it's not always possible nor necessarily advisable that we -- that's not a sector where we can necessarily just pass on that additional cost to our customers.

And we have to be mindful also of that customer experience and the impact that the economic environment has on our customers to keep them playing, but playing at a level that allows them to continue to be engaged with us as a company. And so we can -- so our focus is really on consolidating more of their overall play with us as a group as opposed to necessarily looking to drive higher revenues near term from those players to offset different impacts that we're seeing in certain aspects of the cost structure.

It's a very high level but kind of generic answer, but I think it's a complex one, especially in the context of this market where we're -- or this business where we -- pricing is really managing around theoretical holes across both sports and the casino front.

Got you. Makes sense. I have another question about Brazil. I know that things get delayed and everything. And maybe to some extent, it's a watch-and-wait situation. Could you provide any commentary you might have on the situation there and what your expectations are with that being such a large market opportunity when it does come online?

Yeah. Pat, hi. I will start, Oscar, and if you have anything to add, just jump in. So yeah, Pat, look, from the last -- I mean, the last call that we had, again, that question was asked. And we envision internally that the decree, the bill will not sign and that it will not be regulated in this quarter or the next quarter.

So therefore, we decide at the moment that we will not enter to Brazil on the dot com license. We will wait for the full regulation to happen. We are following closely, I mean, with lawyers, with adviser to see what is the landscape.

Obviously, we appreciate that like any other Latin American operators to be one of the biggest and the most interesting markets for us. We started in a very, I would say, low level to search for potential channels that we can enter, want it to be regulated, and we need to build our position slowly.

We do have strategy. We do have strategy to initiate local operation once it will be regulated. We do have the capability and the capacity in terms at least of knowledge and people that can work in Portuguese and to, I would say, translate and to migrate the software, the Codere software to work in that region.

Obviously when time comes and it will be regulated, then, there will be the question of financing because it's a huge market. We assume that the big brands that are already operating such as bet365 and 888, they will just increase in marketing spend, want it to be regulated so that we need to be prepared to see exactly how and in which position we enter into that market and which part of Brazil. Brazil is a huge country. Maybe we start with some areas and not with the whole overall continent.

So again, we have it on the, I would say, the blueprints. It's still on the stage of growing and preparing things. We didn't do anything to start any operation on a dot com level.

Great. Thank you so much. That's all I have. Congrats on a great quarter.

Thank you.

Thanks, Pat.

Sure.

Mike Hickey, The Benchmark Company.

Hey, Moshe, Oscar. Good morning, guys. Great quarter. Thanks for taking my questions. The -- I guess, as a follow-up to the question on inflation, I'm not sure I heard you exactly. But on your consumer -- obviously, you serve a lot of different geographies, but on your consumer, as you see them today, as you serve them today, are you seeing any impact on that consumer given economic inflation sentiment? Are you seeing any direct impact on their spending behavior?

Moshe, do you want to tackle that in terms of what we're seeing from an operating standpoint in terms of generically across our markets, maybe player spend, or what we're seeing in the (technical difficulty).

Yeah. Well, at the moment, we don't see any real impact of the inflation or the macroeconomy trend in terms of the spend. We don't see that spend of customer is going down. On the other hand, since during 2020 and 2021, there was inflation already on the advertising channels cost.

So we don't see any real increase in cost in 2022, in the first six months of 2022, meaning that the advertising and the different media vendor that we are working with up until now didn't increase prices thankfully. If any, I start seeing some mitigation in the course of the sponsorship. And hopefully, we'll soon have some other deal, sponsorship to announce.

But we see that since some of the competitors are finding it hard to struggle and to sponsor some of those media channels -- not necessarily, by the way, from the gaming because the media channel that we're working with having other sponsor from other areas, and they are struggling to invest money and to spend money on advertising. So there's some mitigation of that cost.

So we see even prices are either stable or even, in some cases, going down a bit. But in terms of the players spend at the moment, we don't see any changes.

Thank you, Moshe. You mentioned product profitability. Obviously, that's a narrative all operators are working to achieve now given the environment if they're not already there. I realize you're probably not in the position. You said after 3Q, you'd probably give us more visibility. But can you talk about the puts and takes on how you think about rewiring your business to potentially accelerate profitability given capital restraints and everything else challenging the market that you're in?

And I guess maybe as a lead into that, when you look at Spain in particular, obviously, that's a combination of both growth and profit for you. Do you expect a continuation of that market, which I think would be pretty critical to achieving profitability in '23, '24? And then anything else you want to add would be great.

Yeah. Maybe I'll take -- Moshe, if it's okay, I'll take the first one and then if you want to speak to Spain. Mike, I think that the key here is as you as you say, that we need to get through our -- we now have two full quarters plus a couple of months under our belt post the business combination.

We need to work through, which is already a process is underway, our preliminary numbers for our '23 budget and our estimates our reforecast for 2024 and see what that tells us in terms of that trade-off between growth and cash burn and see if from there as a company, we feel that we need to make any adjustments, especially in the context of some of the new opportunities that are presenting themselves that have already, that we've already discussed with the markets.

Others that we're working on and others that will present themselves will also govern what we do across the individual core markets and how that may or may not affect, let's say, that core market plan that we brought to the market last year and that we've been speaking to and that continues to be reflected in the revenue walk that we have in the back part of our presentation.

So I think today we have no indication or no view that the plan has changed at all versus what we set out to do. What we are trying to communicate after the second quarter to the market is that we've executed along that plan and that we're going to, obviously in the context of -- we're mindful of the market conditions, where the capital markets are, how the shares are trading.

But we continue to see the market opportunity across our core markets and some other things that we're taking a look at as great opportunities and where there's lots of room to grow. And I think that our focus is going to continue to be the same, even if around the edges, we start tweaking some of the priorities across existing and new markets.

Moshe, do you want to touch on the --

Thank you. The -- yeah. Sorry, Oscar. Excuse me.

Do you want to speak to Spain, how you're seeing Spain in terms of the capacity for us to continue building off the positive results that we've seen the last couple of quarters on the back of regulation?

Yeah. So as I mentioned in the previous question, in Spain, although it's extremely challenging to acquire more customers because of the advertising ban and very few advertising channels, we are working now towards some, I would say, creative regulated channels that will be able -- that will allow us to increase exposure. At the same time, we are enhancing our omnichannel and cross-channel activity, and I would say, operational activity on the ground in order to increase the position towards the retail side.

I think that in Spain will happen two things. I think that we will see the trend of reductions of competitor our goal next year as well. We know already that the mid-, small-size operator are struggling to operate without any new, I would say, new customers database. And therefore, they decrease any other on our digital spend investment on the PPC side, on the affiliate side, on the SEO side, the search engine optimization.

At the same time, we see that our -- again, our own voice of share of the brand, a bit slowly but surely towards the, I would say, the double-digit percentage of the market share. So that's a good trend. So we believe that the positive EBITDA will remain the same in the next quarters as well.

Nice. Good to hear. Last question, definitely, I think more longer-term focus and Oscar probably not helping yet in profitability. But originally, you guys targeted the US market long term into the baseball game maybe, but just curious.

Obviously, there's a lot happening in California, and California has about $16 million Hispanics and Latinos. And so it looks like that could be a really strong market extension of your brand to enter US. So obviously, we don't know at this point if they're going to legalize or not.

But if they do, if they are successful legalizing sports betting in California and given the demographic, that is certainly I would think a compelling entry spot for you given your player and brand base. Is there an opportunity for you have to enter the US market in California '23, '24? Thanks, guys.

Yeah. So for sure, I mean, I think that the same answer that apply to our to Brazil. I think that it's the same answer probably that we have for California or any other states that has like a big presence of Latin American population.

We as -- a public company, we're looking for moving like very big bricks into the business, enter like very big alliances. And we think big, and we think for a long term. And definitely, beyond Latin America, North America, this is the market to be.

We know, and we appreciated the size of the market, the capabilities and the spend per customer based on those that's are already operating in New Jersey and so on. But again, I mean, us as the operational side of the business, we are very much focused to bring the business to the point that, as I mentioned before to be profitable to deliver the forecast that we promised to our investors.

We're very concentrated at the moment in Mexico, Argentina, and Colombia to grow our presence over there. Once those markets will be regulated, I mean, either California or Brazil, but for your -- refer to your question about California, I think that the right way for us to do some sort of an M&A deal in those markets.

We will bring to the table obviously the operational capabilities, the branding. I think being a sponsor -- main sponsor for Real Madrid and River Plate and Rayados, which has a very big, I would say, customer base supporters in those countries in California and in Florida for the Mexican League and the Argentinian league and for the Spanish League, obviously, on the sports betting. I think that that by itself is a very strong entry level from the brand side of Codere.

And then what we'll need is probably to do some sort of financial transaction or any -- I would say, a transaction that would be related to a license holder. And I think that will have a very strong opportunity to enter those markets.

But still, we have to see that, first, it's been regulated. We need to see that we are finishing this year with the right performance and then we'll look forward. We're very focused at the moment of what we're doing.

Thank you, guys. Good luck.

Thank you.

Thanks.

(Operator Instructions)

Okay. In the meantime, I will ask a couple of questions that we have on the webcast platform. The first one is on Q2 performance in Mexico, and if it was helped by any COVID-related restrictions that we had on the retail side that may have played to the advantage of online.

That was more -- I think, that was more related to the second quarter of last year. I mean, this year, we didn't have any restriction. I think if I'm right, Oscar, on the retail side on the COVID. I think that the retail is open more than six months. Is that right?

I think that's right. I think the retail operations largely were up and running and performing. And I think that will be in the second quarter of 2022, if that was the question that we necessarily got much of a benefit from the COVID impact on the retail business.

Okay. One final one on the webcast. Can you comment on the terms of the Cordoba license? Will the 10 licenses be awarded to the different applicants?

Yeah, I can take that one. I mean, it's a good question. We'll see how the process evolves. We submitted our application August 5. In theory, we can hear something back in the early part of this month.

I believe it's in the public domain, but we understand that one of the 10 applicants didn't have their second envelope opened, which we understand that they wouldn't have met the technical criteria for the applications. But I think we have no reason to believe that we as one of nine or 10 requesting up to 10 licenses wouldn't be granted a license. But we have to continue in the process, see how it evolves.

It will probably unfold over the next couple of months, and we'll see where we are from there. But in our mind, we're preparing to be up and running and operating into next year and starting to think about how we include this business and the priority we give is into our 2023 budget and beyond.

Okay. So we have no more questions on the webcast. So I think we can --

Operator, any other questions from the callers?

Not at this time.

Okay. Well, if there are no further questions, we will leave it here. Anyone, feel free to reach out to myself or Oscar for any additional questions. And we look forward to speaking with you again for our Q3 results in mid-November. Thank you.

Thanks, everyone.

Thank you, everyone.

Ladies and gentlemen, this will conclude today's presentation. Thank you all for joining. You may now disconnect.