Brazilian bill passes, includes iCasino
Brazilian Congress vote, exclusive interview with Codere Onlien CEO +More
Buenas dias! On this week’s agenda:
iCasino is the surprise inclusion as Brazil’s lower house passes the amended sports betting legislation.
An exclusive interview with Avi Sher, CEO at Codere Online.
At a glance including a Chilean minister under fire.
Correction: The Spanish version of this newsletter mistakenly asserted that Codere once owned Caliente and that its market share in Mexico was larger than that of its rival. It didn’t and it isn’t. I+M is happy to clear that up.
Brazil vote
Surprise inclusion of iCasino in amended legislation before Congress.
Passed: The Brazilian lower house has voted in favor of the amended sports-betting bill, which now includes iCasino as part of the legislation. The heavily amended government bill was introduced in the lower house by Adolfo Viana of Bahia State who has been charged with shepherding the legislation through Congress.
The bill as amended is the latest version of the Provisional Measure, which was published by the government in July.
The amended measure still includes a headline tax rate of 18% and provisions for a player tax. It also sets the licensing fee at BR30m or ~ $6m.
The government believes it can raise up to BR1.64bn (~$335m) for the 2024 budget from regulating online gambling.
The vote took place yesterday and the bill now moves on to the Senate. The bill partly replicates the Provisional Measure on sports betting published by the Brazilian government at the end of July and due to expire in November.
This version (PL 3626/2023) would maintain the main tax rate of 18% on GGR. This rises to ~30% when adding additional services and local taxes.
It would also maintain the income tax on players’ earnings (27.5%) and the cost of about USD$6m on five-year operating licenses.
Strict machine: In addition, the restrictions on advertising and marketing would be much stricter under the bill of the Chamber of Deputies than under the regulatory regime proposed by the government's interim measure.
It would be forbidden to offer any kind of bonus as an incentive to place a bet.
An important change is that licensed operators will now be able to offer bets on “virtual online gambling events” determined by random number generators, in addition to online and retail sports betting.
Now the bill is passed to the Senate, which will have 45 days to review, amend and vote on the bill.
Match-fixing bans
Brazil: FIFA has moved to ban for life three players found guilty of match-fixing while eight further players have had their punishments extended. The Brazilian Football Confederation (CBF) had called for FIFA to extend the bans from national to international.
Ygor Catatau, Gabriel Tota and Matheus Gomes were found to have accepted money to fix games by a police investigation.
All eleven players were initially punished by the Brazilian Superior Court of Sports Justice (STJD).
Separately, a special investigatory commission (CPI) in Brazil's Chamber of Deputies has approved a motion to summon Lucas Paquetá, under suspicion for deliberately receiving yellow cards while playing for EPL side West Ham.
Ball of fire
Blazes ruling: The court of São Paulo has given permission for Anatel, the National Telecommunications Agency to order the shuttering of the gambling site Blaze. The company has been the subject of multiple lawsuits for promising a 100% return on the money and for not keeping winning bets.
According to the document signed by Anatel's Superintendent of Supervision, Marcelo Alves da Silva, Blaze's website should be blocked immediately throughout the country, and it is no longer possible to access it.
In the ruling issued by the 2nd Chamber of Tax Offences, Criminal Organization and Money Laundering of São Paulo, the judge mentions ‘crash bets’, in which the player ‘tests his luck’ by trying to find the right time to withdraw and win. The judge describes this modality as a “game of chance corresponding to software generally acquired outside the country”.
** SPONSOR’S MESSAGE ** GeoComply is a leading provider of cutting-edge anti-fraud and geolocation solutions, trusted by the world’s leading sports-betting and iGaming operators.
Hit the market, set and achieve profit goals with:
The OneComply 360° license management solution
Market-leading KYC approval rates
The gold standard of geolocation to ban sanctioned countries
One of the most comprehensive global databases of devices linked to fraud
Our offering is cost-neutral because operators seek to avoid fraud-related fines and losses and thus increase their profits.
Learn more at geocomply.com
‘We are not thinking about Brazil’
Interview with Aviv Sher, CEO of Codere Online.
It's been a good year for Codere Online. Eleven years have passed since it obtained its first license to operate online games in Spain (2012), seven years since it arrived in Latin America via Mexico and just two years since it went public on Nasdaq in December 2021 and it already has an expectant position in the Spanish and Latin American markets, with presence in Mexico, Colombia, Panama and Argentina. Its financial results for the second quarter of 2023 are in line with those of the first quarter of the year and allow the company to focus on further growth. Especially – for now – in Mexico.
I+M: Reading the background of the company, it seems the IPO in 2021 was somewhat of a controversial move.
Aviv Sher: We started five years ago as a business unit of the Codere group, but when the pandemic started and the group faced some liquidity problems, because all the gaming halls were closed, we decided to seek financing only for the online part. One of the alternatives was to go public through Nasdaq and that is what we did. We raised $100m to become a leading brand in Latin America, dynamizing and strengthening our presence in the region. And that is what we have done and are doing.
I+M: The company is now in Mexico, Panama, Colombia, and Argentina, is that right?
Aviv Sher: Yes. Taking advantage of this revenue and the infrastructure we have, we think that the online can benefit from it and reach the presence, importance, and size that the group has in retail in the region.
I+M: For example?
Aviv Sher: Codere retail in Mexico is the largest operator, but in online, Caliente started four years earlier and they are the current market leader. When we raised the money (from the IPO) we looked at Latin America as a whole, but I think we were a bit too optimistic and did not consider that Mexico is a huge market and the investments we had to make to be able to compete with Caliente.
I+M: But they are doing well...
Aviv Sher: We are seeing such a good ROI in Mexico – something we don't see in smaller places like Colombia – and because the market values profitability so much right now, we are directing most of our investments to Mexico where we think we will reach it faster. Then, maybe later on, in the next few years, we will do the same in other countries.
I+M: Is the special focus on ROI and EBITDA because you are listed on the stock exchange?
Aviv Sher: Yes, it is. Where we see good ROI, we inject more money, and that place now is Mexico. We see the growth and we see how it works. To finally become profitable in 2024, it is important for us to maintain the right ROI and the right investment mode. When we went public in 2021 and much of 2022, the market was looking for revenue growth in companies like ours, and the best-valued companies were the ones that could grow revenue the fastest.
In the wake of the inflationary crisis, the closing of easy access to financing caused the market to put revenue growth on the back burner and prioritize profitability and cash generation as the most important metric. When we invest in a new market, even if the initial growth is very high, we penalize profitability because it can take a couple of years to become profitable. That is why we now prefer to maintain our investment in Mexico, where we are already at the end of the road to profitability, with a relevant scale, a solid customer base, etc.
I+M: That is in the expectations of the market?
Aviv Sher: That is the strongest promise we made to the market and that is what we are trying to do, so all our activity and all the optimization we are doing is to make the company profitable in 2024.
I+M: How do you see LatAm?
Aviv Sher: We see LatAm as a strategic offering, but right now we are focusing on Mexico and I think, in a second stage, when we are profitable and the markets are friendlier to us and as a consequence better our ability to raise more debt or equity, then we can apply the same strategic position that we have in Mexico in other markets. But for now, we see a strong market that works for us, we have a good plan, we know how to generate ROI in this market and for the $100m we have raised, so we will continue there and take less risk in other areas.
I+M: Would you say that going public has made you a less flexible company because of the number of restrictions and requirements you have to meet?
Aviv Sher: We have an internal debate about whether or not it was best to go through an IPO on Nasdaq. At the time it was the vehicle that offered us the best valuation in the market. Codere (the parent) only gave up 33% control and in return we got $100m. The other options were much more expensive in terms of capital raise. Being on Masdaq is indeed very restrictive and very demanding.
I+M: In addition to industry regulations....
Aviv Sher: In addition to all the gaming regulations that we are facing we also face those of Nasdaq which, I think, in terms of a stock exchange is among the most difficult in the world and the benefit that we should have gotten from being listed there has not been reflected in an improvement in our ability to raise capital or issue debt on the terms that we are trying to find. So, basically, we're a good investment at a good valuation, but we're paying for it on a daily basis not in interest, but in extra operations and people that we need just to service the Nasdaq requirements and in return we don't have access to all the funds and all the benefits that a company that regularly lists there has.
I+M: Do you think that was the right decision?
Aviv Sher: I don't know. This is what we have now. Maybe we could have accepted a less lucrative offer and in return remained a private company and maybe less restricted. With our size and revenue, it is very difficult to be a Nasdaq-listed company, because the regulations and treatment that apply to us are almost the same that apply to Google, but it is a $280bn revenue company and we with €150m. So, it's a little bit weird and we are doing our best to facilitate everything and I think we did a good job so far.
I+M: It must be frustrating...
Aviv Sher: And more frustrating is that even though we're doing a good job and we're continuing to grow as we report to Nasdaq, still the stock doesn't respond. So, we're a little bit disconnected from the market: we're doing all the things we need to do, but we're not enjoying any benefit from Nasdaq. To investors and maybe to our customers as well, it gives transparency, you see everything, we show everything, everything is very well regulated. All our numbers are open to the public and for me, it's also a benefit that everything is public, especially as a gaming company. I'm trying to communicate that to our players, to give them the confidence that they are dealing with a real company that is fully regulated, that their money is safe and that we are taking all the necessary precautions to ensure safe play and other things that are required not only by local regulation, but also by Nasdaq and the indicators that they require.
I+M: Right or wrong decision?
Aviv Sher: Actually, the decision was right. I will tell you why it was, and this is not a debatable situation: without this $100m, without these funds, we would not have been able to grow inorganically and probably could only earn 10 to 15 percent every year whereas now, year after year we double our revenues or even more depending on the market in question. So yes, with this money we were able to deliver what we promised and that is an amazing thing.
You have to remember that when we raised the money in 2021 the markets valued growth and revenue growth over EBITDA and now it's the other way around, having positive EBITDA is more important than growing revenue. This is the path we are on, and we believe it is the right one. We are remarkably close to achieving positive EBITDA and, in fact, we have already seen it in some months. So, I think next year we will be able to deliver a positive number.
I+M: At this moment, several countries in the region are modifying, renewing, or developing new regulatory frameworks for the gambling industry and in particular for online gaming: Peru, Chile, Colombia, Mexico, Argentina and Brazil. You can only operate in regulated markets, where are you going to move to, when are you going to enter Brazil?
Aviv Sher: In general, for Codere Online the more countries that open regulated markets with ad hoc regulators and clear rules, the better. We see them as an opportunity, and we were among the first global brands to identify this trend of countries having to regulate online gambling. We were among the first to enter Colombia, we continue to operate strongly in Mexico, we were among the first in Argentina, in the city (Buenos Aires); we welcome regulation in general, because it is the only way to work for us: a regulated market with clear rules and taxes and payment structure, that is what creates value for us.
Regarding Brazil... for the moment, as I said in our investor call, we are not thinking of going.
I+M: Could you explain why?
Aviv Sher: First of all, the size of the Brazilian market. It is true that it is in Latin America, but it is almost the size of the U.S. It is almost a different continent, and it is also different from a technical point of view: it is a different language. And for us to be able to pursue the strategy that we have used in other parts of the world - be it Spain, Mexico, Colombia, or Argentina - we estimate that the investment would have to be about $50m in Brazil. This size of investment, now that you know we have raised $100m is like making another new company.
So, at the moment we don't have enough money to go to Brazil, really, what we are looking at – because of our lack of knowledge of that market – and it could be a possible solution is to find a partner for Brazil. A local partner will be great for us and then maybe we can raise capital, or the partner can bring capital, but at the moment, while the regulation is not even finished it is not a priority. Once the regulation is finished and we have a clear budget for 2024. I think we can approach Brazil next year and analyze the market and see how we can enter it because yes, it is something we want to do, but not in the short term, but in the medium term. And the same thing about the US market: from the beginning we said we were going to do it in a second stage because it is a complex market, and we also think we need a partner there. There are sixty million Spanish speakers in the US.
But in a second stage and with more money or more equity raise, or debt raise or something like that that will allow us to work there seriously. So, when we focus, we do it right. This is what we have done in Mexico or Spain and other countries, and we need more capital to execute it, but we still want to deliver on our promise to our investors that we will be profitable in 2024.
I+M: Are you looking at other regions as well?
Aviv Sher: I don't think we're going to look anywhere other than America. We used to have a small operation in Italy that didn't work. Europe is a very mature market with strong regulation, and we identified the opportunity in Latin America and the U.S. which are developing markets for gaming. Of course, also from a macroeconomic point of view we see growth in those countries and the regulation is clear, so we don't see us going elsewhere even in the medium term, maybe later.
I+M: How do you see your numbers for next year 2024?
Aviv Sher: In terms of numbers, I'm not sure I can say, but I know we are in the right direction. We continue to grow on a quarterly basis in terms of revenue and this growth will continue. I see steady, probably double-digit growth and positive EBITDA towards 2024. I think we can meet those targets.
** SPONSOR’S MESSAGE ** EveryMatrix delivers iGaming software, solutions, content and services for casino, sports betting, payments, and affiliate/agent management to 200+ global Tier-1 operators and newer brands. The platform is modular, scalable, and compliant, allowing operators to choose the optimal solution depending on their needs.
EveryMatrix empowers clients to unleash bold ideas and deliver outstanding player experiences in regulated markets.
At a glance
Chile: The Chilean deputy Marco Sulantay filed a letter against the Minister of Justice and Human Rights, Luis Cordero, to include in his Declaration of Assets of Interests that, before joining the executive and as a private attorney, he produced a legal report for the Association of Gaming Casinos.
Sulantay said that the minister, “in his particular work, made a legal report regarding online platforms, which was commissioned by the Casinos Association and, according to the information, did not declare them having the obligation to do so.”
Days earlier, on September 1, the ministry headed by the aforementioned Luis Cordero decided to grant a period of thirty working days to the National Association of Professional Football (ANFP) to “dismantle” the commercial contracts signed with online sports betting operators, because they conduct an activity “outside the law.”
Speaking to the Chilean media outlet Bío Bío, Sulantay said that the report prepared by Cordero was delivered on January 5 of this year and that, six days later, the lawyer took over as minister of state. He added that the problem is not that he has practiced his profession, but that in the paper “some positions were taken” on online platforms that could generate future conflicts of interest.
Sulantay warned that, eventually, online betting platforms “can take this to have some kind of argument and counter some definition” in some legal process. “This may be a point to dismiss the ministry’s action in this case, and for an omission that I think I could correct today,” he said.
“My point is that this issue is so sensitive, there are so many people and institutions involved, that it is desirable that we know all the information of all those involved in the case,” said Sulantay, adding that he agrees with the decision of the Undersecretariat of Justice regarding the contracts of the ANFP and the online gambling houses.
Sulantay is one of the authors of the bill that seeks to ban the advertising of bookmakers in sports clubs, which was approved in April by the Chamber of Deputies and is awaiting debate in the Senate, specifically in the Culture Committee.
Cirsa achieves an operating profit of €158m in the second quarter of the year: Cirsa presented its financial report for Q223 in which it recorded operating revenues of $340m and an operating profit of $170m between April and June, up 26.5% and 19.5% respectively.
Pragmatic Play presents roulette table in Brazil: Pragmatic Play introduced a regional roulette table for operators in Brazil. This is the first Brazilian Portuguese version of their best live casino product. The introduction includes the provider's high-level study, which comes with an attractive 4K view, which will go very well with operators in Brazil.
Galaxsys launches the new Totem game: Galaxsys, the non-traditional slot provider of fast and skill games, announced its latest release, Totem, Roll the Dice, Roll the Board game, which is now available for tier one operators and aggregators.
Chilean Justice confirms the revocation of Enjoy’s license to operate the Puerto Varas casino. The First Chamber of the Court of Appeals of Santiago decided to dismiss the claim of illegality of the casino operator Enjoy against the sanction imposed by the Superintendency of Casinos and Games (SCJ) and which revoked the operating license of the Puerto Varas casino in March 2022.
The administrative revocation procedure was initiated on 2 August 2021. It was after the inspectors of the Superintendence found on the ground that, after the deadline indicated, the comprehensive project committed by the operating company had not been built.
The mayor of the city, Tomás Garate, remarked that this is an unprecedented event in the country. Meanwhile, Enjoy fired on the municipal government. They accused them of not being able to carry out the works of the room because of the local government and asked the Superintendence of Gaming Casinos (SCJ) to declare the impossibility of doing so. On the other hand, the Municipal Works Directorate assured that the project did not conform to the construction standards required by the current Regulatory Plan and has not yet granted the building permit. Finally, on February 2, 2022, the Superintendence submitted the background to the Resolutive Council.
Argentina: The opening of the Platinum Hotel in General San Martín has already been set on the agenda. This is the third venture of the Casinos del Chaco Group, whose inauguration is scheduled for March 2024.
Hotel Platinum de General San Martin is designed as a 4-star superior hotel complex. Once operational, it is expected to provide employment for thirty people, with the potential to increase to fifty.
The final project, with the equipment, requires an investment of more than $3.5m.
Playtech: Playtech's robust growth in Mexico and Brazil, through Caliente and Galera.bet, respectively, have boosted the provider's results in H123. Playtech has recorded an 8% increase in revenues, to €860m in the first half of the year which has contributed to a record adj. EBITDA.
B2B revenues increased by 7% compared to a year ago, to 334.5 million euros, and regulated B2B revenues increased by 15%, to 262.5 million euros.
Overall, adj. EBITDA increased by 10% to €220 in the first half of 2023, with adj. B2B EBITDA growing by 5% to €81.3m and adj. B2C EBITDA increased by 14% to €138.6m.
As a result, Playtech made a profit for the period of €3.1m, compared to €110.3m a year ago, as the period of the previous year included discontinuous profits of €38.9m from the divested financial segment.
Publishing schedule
This is the English version of the LosIngresos+Mas newsletter published yesterday (14 September).
An +More Media publication.
For sponsorship inquiries email scott@andmore.media.
