Codere Online US Corp (CDRO)

Company Profile

Codere Online US Corp. (NYSE: CDRO) is a digital gaming company that develops and operates online sports betting, casino, and interactive games for the United States market. Founded in 2021, it is a subsidiary of Codere S.A., a Spanish gaming company with over 50 years of history.

Codere Online US focuses on offering localized digital gaming solutions tailored to US players. Their core business areas include:

• Online sports betting: Offering pre-match and in-play betting on a wide variety of sports, including major leagues and niche events.
• Online casino games: Providing classic casino favorites like slots, blackjack, and roulette, as well as exclusive titles powered by their own technology.
• Interactive games: Developing and operating skill-based games and other non-casino interactive entertainment experiences.

The company is led by an experienced executive team, including Moshe Edree (Chairman and Chief Executive Officer), Oren Lahav (Chief Financial Officer), and Michael J. Light (President). Codere Online US operates under a decentralized corporate structure, with each state’s business unit managed independently to adapt to local regulations and preferences.

Top Products and Market Share

Top Products:

• Codere Sports: Online sportsbook offering a comprehensive betting experience across various leagues and sports.
• Codere Casino: Featuring a diverse library of slots, table games, and live dealer experiences.
• Codere Interactive Games: Offering a variety of unique and engaging skill-based games.

Market Share:

• Codere Online US has a limited market presence with operations in only a handful of states.
• The online sports betting market in the US is highly fragmented, with FanDuel (22.4%), DraftKings (17%), and BetMGM (15.3%) leading the market.
• Codere Online US faces stiff competition not only from established online sportsbooks but also from land-based casinos and lottery operators entering the online market.

Product Performance & Reception:

• Codere Online US received positive feedback for its user-friendly platform, competitive odds and promotions, and diverse game selection.
• However, its limited market penetration and lack of brand recognition compared to established competitors pose challenges for achieving significant market share.

Total Addressable Market

The total addressable market for online gambling in the US is estimated to reach $121 billion by 2028. With over 300 million people in the US, the potential customer base for online gambling platforms is immense.

Financial Performance

Recent Financial Statements:

• Revenue: $49 million (Q3 2022)
• Net Income: -$17 million (Q3 2022)
• Profit Margin: -34% (Q3 2022)
• EPS: -$0.12 (Q3 2022)

YoY Financial Comparison:

• Revenue increased by 145% year-over-year (Q3 2021 vs. Q3 2022).
• Net income remained negative despite revenue growth, indicating the company is still investing heavily in growth initiatives.

Financial Health:

Codere Online US is currently not profitable and relies on funding from its parent company, Codere S.A. The company's cash flow statement shows continued negative operating cash flows, while its debt load is relatively low.

Dividends & Shareholder Returns

Dividends: Codere Online US has not paid any dividends to date as it focuses on reinvesting profits back into the business.

Shareholder Returns:

• YTD: -79%
• 1 year: -82%
• 3 years: -95% (since IPO)

Growth Trajectory

Historical Growth:

• Codere Online US has experienced rapid revenue growth since its launch, driven by market expansion and increased customer acquisition.
• However, the company's rapid growth has come at the expense of profitability.

Future Projections:

• The company expects continued revenue growth in the coming years as online gambling becomes increasingly popular in the US.
• Profitability remains uncertain as the company continues to prioritize growth and market expansion over immediate profitability.

Recent Initiatives:

• Codere Online US has recently launched operations in new states and expanded its product portfolio.
• The company is also focusing on developing partnerships with media companies and sports leagues to increase brand awareness and customer acquisition.

Market Dynamics

The online gambling market in the US is still in its early stages of growth, with new states legalizing and regulating online sports betting and casino games. This presents significant opportunities for Codere Online US to gain market share. However, the market is highly competitive, crowded, and fragmented, with established operators and new entrants vying for dominance.

Technological advancements and the increasing shift towards mobile gaming will play a key role in shaping the market landscape. Codere Online US will need to continue to develop innovative products, enhance its platform, and adapt to changing consumer preferences to succeed in this dynamic environment.

Competitors

• DraftKings (DKNG) Market share: 17.0% [Competitive advantage]: Established brand, large user base, and diverse product portfolio. [Competitive disadvantage]: High marketing expenses, concerns over profitability.

• FanDuel (PDYPY) Market share: 22.4% [Competitive advantage]: Strong brand recognition, user experience, and strategic partnerships. [Competitive disadvantage]: Limited international presence compared to European competitors.

• BetMGM (MGM) Market share: 15.3% [Competitive advantage]: Access to MGM Resorts' large customer base and land-based casinos. [Competitive disadvantage]: Slower expansion compared to rivals, dependence on MGM's brand.

Challenges & Opportunities

Key challenges:

• Intense competition in the US online gambling market.
• Maintaining a high customer acquisition cost while keeping marketing expenses under control.
• Reaching profitability in a capital-intensive industry.
• Complying with constantly evolving regulatory requirements.

Potential opportunities:

• Continued expansion into new states as online gambling legalization
• Developing innovative and engaging product offerings to differentiate from competitors.
• Partnering with media companies, sports leagues, and other strategic allies to increase brand exposure and customer acquisition.
• Leveraging technological advancements to improve platform functionality and user experience.

Recent Acquisitions (last 3 years)

• Codere Online US has not made any acquisitions in the last 3 years.