Callaway Golf reported net revenues in the first quarter increased 59.6 percent to $1.04 billion. The gains were driven by the acquisition of Topgolf but also double-digit growth in its Golf Equipment business as well as Apparel, Gear and Other business. The company raised its guidance for earnings and sales for the year.
The sales gains were driven by a $229.4 million (247.7 percent) increase in the Topgolf business, which was included for three months in 2022 compared to one month in 2021 due to the timing of the merger, a $91.1 million (24.2 percent) increase in the Golf Equipment business and a $68.1 million (37.4 percent) increase in the Apparel, Gear and Other business. Changes in foreign currency rates had a $21.2 million negative impact on first-quarter 2022 net revenues.
GAAP income from operations increased by $18.2 million (23.9 percent) and non-GAAP income from operations increased by $9.5 million (9.8 percent), amid strong sales across all segments. While changes in foreign currency rates, increased freight expense and other inflationary impacts put pressure on operating margins, the company’s price increases, volume variances and efficiencies were generally able to offset these pressures and the company reported increased operating income across all segments.
First-quarter 2022 GAAP net income decreased $185.8 million to $86.7 million, primarily due to the $252.5 million non-cash Topgolf gain in the first quarter of 2021, partially offset by a favorable $65.4 million change in the company’s tax valuation allowance period over period. On a non-GAAP basis, which excludes, among other items, the Topgolf gain and the change in valuation allowance, first-quarter non-GAAP net income was $70.9 million compared to $76.6 million in the first quarter of 2021. The first quarter 2021 results do not include $27.8 million of pre-tax loss from Topgolf for January and February, which occurred prior to the closing of the merger.
GAAP earnings per common share, diluted, were $0.44 per common share in the first quarter of 2022, compared to $2.19 per common share in the first quarter of 2021. Non-GAAP earnings per common share, diluted, were $0.36 in the first quarter of 2022, compared to $0.62 per common share in 2021. Weighted average diluted shares were 200.8 million shares of common stock for the first quarter of 2022, an increase of 76.2 million shares compared to 124.6 million shares in the first quarter of 2021. The increased share count is primarily related to the Topgolf merger shares being outstanding for a full quarter compared to one month in 2021, along with an accounting change that took effect on January 1, 2022, which requires Callaway to include 14.7 million shares related to the assumed conversion of the company’s convertible notes.
First-quarter 2022 Adjusted EBITDA increased by $42.0 million, or 32.9 percent, driven by a $26.9 million increase from Topgolf and a $15.1 million increase from the non-Topgolf business, which includes continued investment in the corporate functions.
The company completed its previously announced $50.0 million stock repurchase program by purchasing an additional 1,069,287 shares of common stock during the first quarter at an average price of $23.38.
“Our first-quarter results reflect strong performance across all segments, as demand for our golf equipment and soft goods lines remained very strong, and Topgolf finished the quarter on a high note. After a slow start early in the quarter due to Omicron, Topgolf’s March same venue sales surged to approximately 10 percent growth over 2019, resulting in a pleasing plus-2 percent same venue sales growth for the quarter, compared to 2019,” commented Chip Brewer, president and chief executive officer, Callaway. “Our strong start this year, together with continued strong demand across all of our business segments, gives us the confidence to raise our full-year 2022 outlook expectations. I could not be more pleased with how our business is operating or more confident in our ability to create long-term shareholder value.”
For the current year, sales are now expected in the range of $3,935 million to $3,970 million, up from previous guidance in the range of $3,780 million to $3,820 million. Sales on a proforma basis were $3,276 million a year ago.
Adjusted EBITDA for 2022 is expected in the range of $535 million to $555 million, up from previous guidance in the range of $490 million to $515 million. In 2021, adjusted EBITDA on a proforma basis was $448 million.
The company’s brands include Callaway Golf, Topgolf, Odyssey, OGIO, TravisMathew, and Jack Wolfskin.
Photo courtesy Callaway