Callaway Golf Company reported sales in the second quarter ended June 30 surged 208 percent, boosted by the addition of Topgolf and a nearly doubling of revenues golf equipment and soft goods revenue.
Net income reached $92 million on a GAAP basis. Adjusted EBITDA increased $135 million, or 464 percent, to $164 million. The company’s brands include Callaway Golf, Topgolf, Odyssey, OGIO, TravisMathew, and Jack Wolfskin.
“I am very pleased with our performance in the second quarter of 2021 with record revenue and Adjusted EBITDA in our golf equipment and apparel businesses, as well as Topgolf results that continue to exceed our expectations,” commented Chip Brewer, president and CEO, Callaway. “These results reflect the strong momentum and exceptional operating performance across all of our business segments and underscore the strong consumer demand for our products and services. We are encouraged to see that the interest in the sport of golf remains at all-time highs among both experienced golfers and new entrants to the sport.
“As we look ahead to the second half of 2021 and beyond, we are confident that our unique portfolio of businesses is well-positioned for long-term growth,” continued Brewer. “While in the short-term we will experience some lingering supply constraints and other challenges caused by the pandemic, we believe that these challenges will be manageable given current demand levels and actions we are taking to mitigate the impact. Our best estimate of these impacts is included in the guidance we are providing today, and we expect to deliver excellent financial results for the full year. All in all, we are excited about the long-term trends in our golf and outdoor apparel businesses, as well as the growth opportunities for Topgolf, all of which will continue to drive shareholder value.”
Second Quarter 2021 Financial Highlights
- Net sales rose to $914 million from $297 million. Golf equipment and soft goods revenue increased 98 percent to a record $588 million. Topgolf overperformed with $325 million in revenue.
- Net revenue increase was driven by higher-than-expected strength across both Golf Equipment and Apparel, Gear & Other segments, as demand remained high for golf and outdoor activities. In addition, Topgolf, which merged with the company in March 2021, also contributed to strong, higher-than-expected revenue growth.
- Non-GAAP income from operations increased to $118 million from $4 million a year ago. The improvement was led by a $96 million increase in income from operations from the company’s Golf Equipment and Apparel, Gear & Other businesses and an incremental $24 million from the addition of the Topgolf business for the full second quarter.
- Non-GAAP other income/(expense), net decreased $30 million primarily due to a $14 million increase in interest expense related to the addition of Topgolf and last year’s $11 million gain from the settlement of a cross-currency swap arrangement.
- Fully diluted shares were 194 million shares of common stock in the second quarter of 2021, an increase of 100 million shares compared to 94 million shares in the second quarter of 2020. The increased share count is primarily related to the issuance of additional shares in connection with the Topgolf merger.
- Adjusted EBITDA increased to $164 million from $29 million. The gain was driven by a $78 million increase in the company’s Golf Equipment and Apparel, Gear & Other businesses and the addition of $57 million from the Topgolf business.
- Golf Equipment sales rose to $401 million from $210 million a year ago. Operating income improved to 98 from 29.
- Apparel, Gear & Other sales climbed to $187 million from $87 million a year ago. The segment showed an operating income of 16 million against a loss of $12 million a year ago.
- Topgolf generated revenue and $24 million in operating income. The business was acquired on March 8, 2021.
Looking ahead, Callaway expects net revenue for the full year in the range of $3,025 million to $3,055 million against $1,590 million in 2020 and $1,701 million in 2019.
Adjusted EBITDA for the full year is expected to range between $345 million and $360 million against $163 million in 2020 and $210 million in 2019.
For the third quarter, sales are expected to range between $775 million and $790 million, up from $476 million a year ago and $426 million in 2019. Adjusted EBITDA is expected to range between $51 million and $58 million, down from $87 million a year ago and compared with $57 million in the third quarter of 2019.
Callaway said its third-quarter and full-year 2021 projections are based on the company’s best estimates at this time. They include the estimated impact of certain factors, including the ongoing uncertainty due to the impact of COVID-19 on the supply chain, changes in foreign currency effects, which are estimated to have a positive full-year impact of $36 million on net sales, and increased freight costs. In addition, due to the timing of the Topgolf acquisition on March 8, 2021, Callaway’s reported full-year financial results will only include 10 months of Topgolf results in 2021 and therefore will not include January and February results which were in the aggregate $142.9 million in revenue and $2.3 million in Adjusted EBITDA.
When it reported first-quarter results, the company did not provide specific net revenue and earnings guidance ranges for 2021 given the continued uncertainty related to both the pandemic globally and unsettled market conditions.
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