Codere S A : 20%05/2021 Q1 2021 Earnings release

Q1 2021 Earnings Results

May 20, 2021

Table of Contents
Financial and Operating Overview ...................................................................................	3
Consolidated Income Statement ......................................................................................	4
Revenue and Adjusted EBITDA ........................................................................................	6
Earnings per Share ............................................................................................................	6
Revenue and Adjusted EBITDA at Constant Currency...................................................	7
Operating Expenses ..........................................................................................................	8
Income Statement by Country
Mexico ......................................................................................................................	9
Argentina ...............................................................................................................	10
Spain ......................................................................................................................	11
Italy .........................................................................................................................	12
Other Operations...................................................................................................	13
Consolidated Cash Flow Statement ...............................................................................	14
Capital Expenditures and Acquisitions .........................................................................	16
Consolidated Balance Sheet...........................................................................................	17
Net Working Capital.........................................................................................................	18
Capitalization ...................................................................................................................	19
Gaming Capacity by Venue.............................................................................................	20
Gaming Capacity by Product ..........................................................................................	21
Recent Events ..................................................................................................................	22
Contact Information.........................................................................................................	23

2

Financial and Operating Overview

Herein, figures presented above Operating Profit (other than non-recurring items and impairment charges) are shown excluding the impact of non-recurring items as well as the impact resulting from the application of IAS 29. Adjusted EBITDA refers to EBITDA1 excluding all non-recurring items and not considering Argentine figures according to IAS 29 standards (inflation accounting). All figures are post the application of IFRS 16.

• Q1 2021 Operating Revenue decreased by 54.3% to €127.2 mm as a result of the COVID-19 related closings and operational restrictions. Our Italian retail operation remained closed during the entire quarter, while other markets such as Mexico and Panama were partially closed during most of the period or otherwise operated under significant restrictions.
• Q1 2021 Adjusted EBITDA reached €3.5 mm, 92.7% below Q1 2020, driven by the abovementioned closings and restrictions. All markets except Italy contributed to this positive EBITDA.
• Q1 2021 Adjusted EBITDA margin declined to 2.7%, 14.4 percentage points below Q1 2020 due to the lack of revenues not being offset by the decline in operating expenses, despite the implementation of significant cost savings and efficiency measures in the period.
• In Q1 2021 we generated a net loss of €91.5 mm, compared to a loss of €97.1 mm in Q1 2020, mainly as a result of the closings related to COVID-19, the increase in interest expense and, to a lesser extent, the devaluation of our operating currencies vs. the USD.
• Capex in Q1 2021 was €4.4 mm, 68.2% below Q1 2020, and was almost entirely related to maintenance projects.
• As of March 31, 2021, we had €58.4 mm in cash and equivalents down from €110.3 mm as of December 31, 2020. Our gross debt amounted to €1,061.6 mm and our net debt to €1,003.2 mm, or €1,269.7 mm and €1,211.3 mm, respectively, including capitalization of operating leases (as per IFRS 16).
  As announced on April 22, 2021 and explained in the Recent Events section, the Company entered into a lock- up agreement with its largest noteholders, committing the parties to support a restructuring transaction for the group. In addition, the group entered into note purchase agreements that will provide the group with €100 million of additional liquidity, with the first tranche of €30 million having been received in April, and the second tranche expected on or about May 24, 2021.
• In terms of gaming capacity, our active number of slots by March 31, 2021, was 30,201, deployed across all markets except Italy and Uruguay. In terms of venues, we had 114 gaming halls in operation, 975 arcades, 182 sports betting shops and 5,864 bars.
  Since the end of March, authorities in Argentina and Uruguay imposed additional temporary closings as a result of the evolution of the pandemic in those markets. In parallel, we have continued to open our halls in Mexico and are currently operating 85 of 89 units, while in Spain the State of Alarm ended on May 9th, and restrictions continue to be progressively lifted in the country.

1 EBITDA, as defined by the Company, is operating profit (EBIT) plus depreciation and amortization, variation in provisions for trade transactions, gains / (losses) on asset disposals, and impairment charges.

Q1 2021 Earnings Results

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Consolidated Income Statement1

Figures in EUR mm, except where noted otherwise				Quarter
							Q1 2020	Q1 2021	Var. %
Operating Revenue						278.5	127.2	(54.3%)
Gaming & Other Taxes					(101.2)	(38.3)	62.1%
Personnel						(56.8)	(41.0)	27.8%
Rentals						(8.6)	(0.1)	99.0%
Cost of Goods Sold						(8.6)	(7.2)	16.6%
Other							(55.7)	(37.1)	33.4%
Operating Expenses (excl. D&A)				(230.8)	(123.7)	46.4%
Depreciation & Amortization				(43.5)	(37.1)	14.8%
Variation in Provisions for Trade Transactions	(1)	(0.5)	0.4	n.a.
Gains	/ (Losses) on Asset Disposals	(2)			(1.1)	(2.1)	(94.1%)
Impairment Charges					(2.0)	0.0	n.a.
Non-Recurring Items					(7.7)	(10.6)	(37.6%)
Operating Profit (Pre-Inflation Accounting)			(7.1)	(45.9)	n.a.
Inflation Adjustment on Operating Expenses	(3,4)	(3.4)	(3.0)	9.2%
Operating Profit (Post-Inflation Accounting)			(10.4)	(48.9)	n.a.
Interest Expense						(24.0)	(37.7)	(57.1%)
Interest Income						0.9	0.5	(43.9%)
Gains	/ (Losses) from Financial Investments			(2.8)	(2.4)	13.1%
Gains	/ (Losses) from Exchange Rate Variations	(49.9)	(10.8)	78.3%
Inflation Adjustment	(5)					1.3	4.3	n.a.
Earnings before Corporate Income Taxes			(85.0)	(95.1)	(11.9%)
Provision for Corporate Income Taxes				(14.1)	2.2	n.a.
Inflation Adjustment on CIT	(6)				(1.3)	(2.4)	(90.1%)
Minority Interests in Subsidiary (Income) / Loss	3.3	3.9	18.2%
Equity in Affiliate Income / (Loss)				(0.1)	(0.1)	(20.1%)
Net Income / (Loss)						(97.1)	(91.5)	5.8%
EBITDA
EBIT (Operating Profit)					(10.4)	(48.9)	n.a.
(+) Impairment Charges					2.0	0.0	n.a.
(+) (Gains) / Losses on Asset Disposals			1.1	2.1	94.1%
(+) Variation in Provisions for Trade Transactions	0.5	(0.4)	n.a.
(+) Depreciation & Amortization				43.5	37.1	(14.8%)
				(4)			3.0	3.2	6.4%
(+) Inflation Adjustment on Other Opex
EBITDA							39.7	(6.9)	n.a.
EBITDA Margin						14.2%	n.a.	n.a.
Adjusted EBITDA
EBITDA							39.7	(6.9)	n.a.
(+) Non-Recurring Items					7.7	10.6	37.6%
			(3)				0.3	(0.2)	n.a.
(+) Inflation Adjustment on EBITDA
Adjusted EBITDA						47.7	3.5	(92.7%)
Adjusted EBITDA Margin					17.1%	2.7%	(14.4 p.p.)

1. Figures reflect change in provisions on advances to site owners in connection with contracts to install our machines in their establishments.
2. Figures primarily reflect disposal of gaming machines;
3. Figure reflects, following IAS 29, the net impact on revenues and costs above EBITDA from applying Argentinean inflation to the end of the reporting period on the accrued items and ARS/EUR exchange rate as of March 31, 2021.
4. Figure reflects, following IAS 29, the net impact on costs above Operating Profit from applying Argentinean inflation to the end of the period on the accrued items and ARS/EUR exchange rate as of March 31, 2021, excluding impact on items above EBITDA.
5. Figure includes the impact from applying end of period inflation on fixed assets.
6. Figure includes the impact of inflation accounting on corporate income tax in Argentina.

Q1 2021 Earnings Results

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• Operating Revenue decreased by €151.3 mm or 54.3% to €127.2 mm in Q1 2021, due to the COVID-19 related closings. The most significant decrease (€60.2 mm) took place in Italy which was the only market that remained fully closed in the quarter, but Mexico (€38.3 mm) and Argentina (€26.8 mm) also experienced sharp reductions.
• Operating Expenses (excluding depreciation and amortization) decreased by €107.1 mm or 46.4% to €123.7 mm, as a result of cost reductions across all our markets, especially in Italy (€55.0 mm), Mexico (€21.7 mm), Argentina (€18.4 mm) and Spain (€7.8 mm).
• Adjusted EBITDA decreased by €44.2 mm to €3.5 mm in Q1 2021, as a result of the decrease in revenue from the closings and restrictions affecting all of our markets. The significant revenue decline in our retail operations was only partially offset by the reduction in costs, as the volatility in the openings, closings and operational restrictions made it increasingly difficult to align fixed costs to revenue generation.
• Non-RecurringItems in Q1 2021 were €4.3 mm while marketing investments to grow our online business accounted for an additional €6.3 mm.
• Inflation Adjustment in Q1 2021 represents a loss of €0.2 mm (impact on EBITDA). At the net income level, the impact is a net loss of €1.1 mm.
• Operating Profit (prior to considering inflation accounting for Argentina) decreased by €38.8 mm to an operating loss of €45.9 mm in Q1 2021.
• Interest Expense (including financial expenses from capitalized operating leases) increased by €13.7 mm to €37.7 mm driven by the incremental interest on the newly issued €250 mm super senior secured notes.
• Interest Income reached to €0.5 mm.
• Losses on Financial Investments reached €2.4 mm in Q1 2021 vs €2.8 mm in Q1 2020.
• Losses on Exchange Rate Variations reached €10.8 mm in Q1 2021 derived from the appreciation of the USD against our LATAM operating currencies.
• Provision for Corporate Income Tax decreased by €16.3 mm to €2.2 mm in Q1 2021 driven by significant decreases in accrued corporate income taxes as a result of the reduction of profit before taxes in all of our business units (especially in Argentina).
• Minority Interest represents a gain of €3.9 mm in Q1 2021.
• As a result of the aforementioned results, the Net Loss in Q1 2021 was €91.5 mm, compared to a Net Loss of €97.1 mm in Q1 2020.

Q1 2021 Earnings Results

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