Codere Online (CDRO) Q4 2025 earnings review
Record Top-Line Masked by Looming Tax Shocks
Codere Online closed out 2025 with its strongest quarter in history, delivering €60.7M in Net Gaming Revenue (NGR) and generating €6.7M in Adjusted EBITDA. Growth was heavily skewed toward Mexico, which saw active players surge 43% ahead of the upcoming World Cup. However, the underlying quality of future earnings is highly questionable. Effective January 1, 2026, Mexico increased its gaming excise tax from 30% to 50%. While management guides for higher EBITDA in FY26, achieving it while absorbing a 20-point tax hike in their primary growth engine will require heroic cost controls or massive volume offsets.
🐂 Bull Case
The operational momentum in Mexico is accelerating. Active players hit a record 100,000 in December, driving a 31% YoY NGR increase. The company is successfully scaling its most important market ahead of the 2026 World Cup.
Q4 Adjusted EBITDA of €6.7M more than tripled YoY (€1.9M in 24Q4). The company has proven it can pull back marketing levers to generate significant cash flow, ending the year with €50M in cash and zero debt.
🐻 Bear Case
The statutory excise tax (IEPS) in Mexico jumped from 30% to 50% on January 1, 2026. Because Mexico represents over 50% of the company's NGR and nearly all of its growth, this severely threatens the 2026 profitability narrative.
The 'Other' segment (driven by Colombia) is decelerating rapidly, with Q4 NGR down 26% YoY. The company is becoming overly reliant on a two-country (Mexico/Spain) operational footprint.
⚖️ Verdict: ⚪
Neutral. The Q4 operational performance was spectacular, but the 2026 Mexican tax hike is a structural impairment to margins. We remain skeptical of the FY26 EBITDA guidance until we see Q1 margin resilience.
Key Themes
Mexico Scaling Rapidly Ahead of World Cup
Mexico's active player base is accelerating, growing 43% YoY to 98.8k in Q4. NGR grew 31% to €32.8M. Management's stated strategy to aggressively acquire cohorts ahead of the 2026 World Cup is yielding volume, shifting the overall corporate mix even further toward Latin America.
Operating Leverage Kicking In
The sequential progression of Adjusted EBITDA proves management's ability to drive operating leverage. Q4 Adj. EBITDA reached €6.7M, accelerating from €2.9M in Q3 and €2.3M in Q2. This flow-through allowed the company to comfortably hit the upper end of its FY25 EBITDA guidance.
Mexican IEPS Tax Hike
A massive regulatory headwind materialized: effective January 1, 2026, the statutory excise tax rate (IEPS) on gaming in Mexico increased from 30% to 50%. Mexico is Codere's undisputed growth engine. Absorbing a 20-percentage-point tax increase on top-line gaming revenues without crushing unit economics will be the defining challenge of 2026.
Collapse of the 'Other' Segment
The 'Other' segment, comprised primarily of Colombia and Panama, is reversing. NGR dropped 26% YoY to €3.5M in Q4, and average monthly active players fell 23%. While the onerous 19% VAT on deposits in Colombia expired on Dec 31, 2025, the severe contraction indicates lasting damage to player engagement in that market.
Pristine Balance Sheet Enabling Buybacks
Codere finished the year with €50.0M in cash and zero financial debt. This allowed them to execute on their share buyback plan, repurchasing 391,000 shares for $2.7M. The clean balance sheet provides a defensive buffer against the incoming Mexican tax shock.
Other KPIs
Stable. The Spanish market continues to act as Codere's cash cow, growing an incremental 7% YoY despite a highly mature and competitive landscape. Active players grew a healthy 14% to 55.6k, demonstrating solid retention and acquisition even without outsized marketing spend.
Despite a massive jump in NGR and Adjusted EBITDA, bottom-line net income remained slightly negative (€0.1M loss vs €7.0M profit a year ago). This highlights the heavy drag of D&A, stock-based compensation (Employee LTIP Expense jumped to €6.6M in Q4), and tax provisions beneath the EBITDA line.
Guidance
Decelerating. The midpoint of €240M implies YoY growth of just 7.1%, a notable slowdown from the 15% growth achieved in 25Q4 and the 6% overall growth for FY25. This likely bakes in conservatism regarding the Mexican tax changes and a continued soft recovery in Colombia.
Accelerating. The €17.5M midpoint implies a 26.8% YoY growth rate over FY25's €13.8M. This is a highly aggressive target given the 20% tax hike in Mexico. Management is explicitly betting that marketing efficiencies, scale, and the expiration of the Colombian VAT will outpace the new Mexican tax burden.
Key Questions
Mitigating the Mexican Tax Hike
With the IEPS tax jumping from 30% to 50% in Mexico, what specific actions are being taken to protect unit economics? Will we see a reduction in marketing CPA targets or adjustments to player odds to pass the cost to the consumer?
Colombia Strategy Post-VAT Expiration
The 19% VAT on deposits in Colombia expired on December 31. Is the plan to reinvest aggressively to win back the 26% NGR lost in the 'Other' segment, or has the market permanently shifted to the unregulated space?
Capital Allocation Priorities
With €50M in zero-debt cash and an aggressive EBITDA target, the current buyback plan ($7.5M max) utilizes only a small fraction of liquidity. Are there M&A targets currently under review, or should investors expect a much larger capital return program in 2026?
LTIP Expense Surge
Employee LTIP expense spiked to €6.6M in Q4 alone, dragging net income negative despite record operational results. Is this a one-time catch-up charge, or a structural change to compensation that will persist in FY26?