Callaway Golf Company raised its outlook for earnings and sales for the year after reporting second-quarter earnings that topped Wall Street estimates. Sales in the second quarter jumped 22.1 percent, led by Topgolf and its Active Lifestyle segment TravisMathew and Jack Wolfskin.

“We were very pleased with our second quarter financial results,” commented Chip Brewer, president and CEO. “Our second quarter revenues increased 22 percent, reflecting increases in all major product categories, in all major regions and all operating segments. Continued strong demand, market share gains, pricing, and other business improvements we implemented this year have allowed us to outrun the ubiquitous inflationary pressures, unfavorable foreign currency exchange rates and staffing challenges. As a result, our adjusted EBITDA increased 26 percent. While we are not immune from these macroeconomic headwinds, we believe we can continue to manage through them, and our business remains strong overall. We are therefore increasing our full-year guidance.”

Second Quarter 2022 Financial Highlights
(all comparisons to prior periods calculated on a year-over-year basis.)

  • Net revenues increased $202.1 million, or 22.1 percent, driven by a $78.3 million, or 24.1 percent, increase in the Topgolf segment, a $50.6 million, or 12.6 percent, increase in the Golf Equipment segment and a $73.2 million, or 39.2 percent, increase in the Active Lifestyle segment, formerly Apparel, Gear and Other. Changes in foreign currency rates had a $38.6 million negative impact on net revenues for the quarter ended June 30, 2022. Sales reached $1.1 billion, aligning with Wall Street’s consensus estimates.
  • GAAP income from operations increased $21.7 million, or 20.2 percent, and non-GAAP income from operations increased $17.1 million, or 14.5 percent, due to strong sales across all segments, product categories and regions. While changes in foreign currency rates, increased freight expense and other inflationary impacts put pressure on operating margins, the company was able to offset these through successful Topgolf venues, price increases and increased sales volumes and efficiencies, resulting in an increase in operating income across all segments.
  • GAAP other expenses decreased $10.7 million, or 34.1 percent, and non-GAAP Other expenses decreased $7.5 million, or 27.8 percent, primarily due to an increase in hedge gains related to the dollar strengthening across most major currencies during the quarter and partially offset by an increase in interest expenses related to deemed landlord financing, interest on additional Topgolf venues and higher variable rates on the company’s term loans and asset-based revolving credit facility.
  • GAAP net income increased $13.7 million, or 14.9 percent quarter-over-quarter, primarily due to the heightened performance of its operating segments, partially offset by a $15.8 million change in the company’s tax valuation allowance. On a non-GAAP basis, which excludes the change in the valuation allowance, among other items, non-GAAP net income for the quarter ended June 30, 2022, was $93.5 million compared to $70.5 million for the same period in 2021.
  • GAAP earnings per diluted common share were $0.53 for the quarter ended June 30, 2022, compared to $0.47 per diluted common share for the same period in 2021. Non-GAAP earnings per diluted common share were $0.47 for the quarter ended June 30, 2022, compared to $0.36 per diluted common share for the same period in 2021. Weighted average diluted shares totaled 200.6 million for the quarter ended June 30, 2022, compared to 194.3 million shares for the same period in 2021, an increase of 6.3 million shares. The increased share count is primarily related to a change in accounting guidance, which took effect on January 1, 2022, and requires the company to assume the full conversion of 14.7 million shares related to its convertible notes in its weighted average diluted share calculation. Non-GAAP EPS of 47 cents topped Wall Street’s consensus estimate of 42 cents.
  • Adjusted EBITDA for the quarter ended June 30, 2022 increased $42.8 million, or 26.0 percent, which consisted of a $29.2 million increase from Topgolf and a $13.6 million increase from the non-Topgolf business, which includes continued investment in the corporate functions.

2022 Business Outlook

  • The company currently estimates that its full-year 2022 net revenue will be $3,945 million to $3,970 million, which includes $129 million of negative foreign currency impact. Previous guidance called for sales of $3,935 million to $3,970 million. The full year 2022 net revenue estimate assumes Topgolf segment revenue of approximately $1.56 billion consistent with previous guidance. It also assumes Golf Equipment segment revenue growth of 12 percent or more, up from prior guidance of roughly 10 percent and the Active Lifestyle segment revenue reaching approximately $1 billion, consistent with previous guidance. On a consolidated basis, 2022 full-year revenue is estimated to increase over 20 percent compared to 2021.
  • The company increased its full-year 2022 adjusted EBITDA guidance to $555 million to $565 million, an increase of $15 million at the midpoint of guidance compared to prior guidance driven by increases in Golf Equipment and Topgolf segments. The full year 2022 adjusted EBITDA guidance estimate for the Topgolf segment is $235 million to $245 million. On a consolidated basis, at the midpoint of guidance, 2022 full-year adjusted EBITDA is estimated to increase by $100 million compared to 2021.

Photo courtesy Callaway/Topgolf