Casino giant Caesars Entertainment on Tuesday reported higher profits than expected for Q3, confirming what labor union members seeking a new contract have been saying – that the company is seeing record numbers in its pandemic rebound.
In addition to announcing record earnings, the quarterly call gave the first indication that the company was nearing an agreement with workers who have been threatening to strike.
The company posted a record adjusted EBIDTA of $1.04 billion, with much of this success attributed to a new online casino launch, Caesars Palace Online, which went live in mid-August.
Q3 revenue for Caesars (NASDAQ: CZR) hit $2.99 billion, ahead of a projected $2.94 billion and a 3.7% increase over last year. This resulted in earnings of 34 cents/share, well ahead of a projected 27 cents/share.
"We experienced Adjusted EBITDA growth year over year in all three of our primary operating segments including Las Vegas, Regional and Caesars Digital,” Caesars CEO Tom Reeg said. “Our Regional segment achieved an all-time quarterly Adjusted EBITDA record as we harvest the recent portfolio investments within this segment.”
Adjusted EBITDA came in at $3.01 billion, a 31.6% year-on-year increase.
Revenue from Caesars’ Las Vegas casinos grew 7.9% to $3.38 billion. Revenue from regional casinos outside of Las Vegasticked 1.7% higher at $4.42 billion.
However, most of Caesars’ growth in Q3 came from sports betting and online gaming, which returned a positive adjusted EBITDA for the second straight quarter.
Revenue for Caesars Digital reached $669 million, a 115.1% jump year-on-year.
These positive indicators all come on the back of an increasingly disgruntled workforce, which is threatening to strike in coming days or weeks if the casino company doesn’t meet their demands for higher pay and better working conditions.
Caesars was in the latest round of labor negotiations with union representatives on Friday.
“We’ve made some progress. More than we’ve made in quite a while,” Culinary Union Secretary-Treasurer and chief negotiator Ted Pappageorge said at a press gaggle. “But unfortunately not nearly enough.”
The Culinary and Bartenders unions have been threatening a strike, marching in picket lines, and most recently organized a stunt where union members shut down the Las Vegas Strip in an attempt to let casino operators know that they are prepared to disrupt their thus far successful post-pandemic recoveries.
“We will strike if necessary. When these companies are making incredible profits, record profits, workers deserve record contracts,” Pappageorge said. “These companies have to be prepared to share the wealth.”
But Pappageorge noted that the union has seen some movement with Caesars on compensation, health care, pensions, and safety conditions. The unions are also negotiating for new contracts with MGM Resorts and Wynn/Encore Resorts.
On the Q3 earnings call, Caesars executives told investors that increased labor costs had already been factored into projections, and dismissed the possibility of a strike disrupting operations.
“Know that we are accruing for the anticipated expenses that will come with the new union contract,” Reeg said. “We are in active dialogue with the unions. I'm involved with the union. I'm involved personally in the discussions. I'm optimistic we will reach a solution.”
Reeg claims the company has every interest in sharing the wealth with its labor force – it’s just a matter of hammering out a deal for an extended period of time that is taking time as union employees work without contracts.
“We have done quite well as a company post-merger, post-pandemic,” Reeg said. “Our employees should and will participate in that. So you should expect that when we reach agreement on a contract, it's going to be the largest increase that our employees have seen in the four decades since we started interacting with the culinary Union. It’s well deserved [and] anticipated in our business model.”