Callaway Golf Company reported a loss in the fourth quarter ended December 31, but results exceeded Wall Street’s targets due to a continuing recovery at Topgolf and ongoing momentum at its apparel and golf equipment businesses. 

Sales surged 89.9 percent in the period, and Callaway predicted sales would expand 21 percent in 2022.

“I am pleased to announce another quarter of strong results, driven primarily by Topgolf domestic venues, which benefited from increased social and corporate events bookings and high walk-in guest turnout, along with continued momentum in our apparel and golf equipment businesses,” commented Chip Brewer, president and CEO, Callaway. “The quarter topped off a truly outstanding year for Callaway, and I am extremely proud of the global team for their efforts. It was a record year in many aspects, and I am excited about the opportunity to build on this strong foundation as we look ahead to 2022 and beyond.” 

“The combination of Topgolf and Callaway early in the year was transformational, and we have been thrilled by the strong revenue growth and profitability, with both exceeding our initial expectations. We believe our strong pipeline for new venues, along with the rapid expansion of our Toptracer range technology, will deliver significant long-term shareholder value,” continued Mr. Brewer. “In our golf equipment business, we proved our ability to adapt and flex our operations to meet the growing demand for the sport of golf. Given current trends and positive industry fundamentals, we believe this segment will continue to grow in 2022. Lastly, our apparel concepts performed extremely well across all channels and all regions and have strong brand momentum moving into the year ahead. Overall, we have never been more confident in the direction of this business and the opportunity for growth ahead.”

Fourth Quarter 2021 Financial Highlights
(comparisons to prior periods are calculated on a year-over-year basis)

  • Net revenue increased 90 percent, driven by the addition of Topgolf, which benefited from walk-in traffic and social event bookings, better-than-expected corporate events business, and growth in the Apparel, Gear and Other segments.
  • Non-GAAP income from operations decreased $21 million year-over-year due to a planned decrease in golf equipment sales as the company shifted production of golf equipment to build 2022 new launch product during the fourth quarter of 2021 and increased operating expenses. Callaway also launched several products in the comparable fourth quarter of 2020, creating an uneven year-over-year comparison.
  • Non-GAAP other income/(expense), net decreased $(24) million to $(37) million, primarily due to a $28 million increase in interest expense related to the addition of Topgolf.
  • Non-GAAP loss per share was ($0.19) in the fourth quarter of 2021, compared to a loss of ($0.33) per share in 2020. Diluted shares were 186 million shares of common stock, an increase of 92 million shares compared to 94 million shares in the fourth quarter of 2020. The increased share count is primarily related to the issuance of additional shares in connection with the Topgolf merger.
  • Fourth-quarter 2021 Adjusted EBITDA increased $27 million, driven by a $46 million contribution from the Topgolf business, partially offset by lower adjusted EBITDA in the golf equipment and apparel businesses. Topgolf’s Adjusted EBITDA contribution was $177 million on a full-year basis. Due to the timing of the Topgolf acquisition on March 8, 2021, Callaway’s 2021 full-year results only include approximately ten months of Topgolf results and therefore do not include January and February results, which were in the aggregate $2.3 million in Adjusted EBITDA.
  • During the fourth quarter of 2021, Callaway repurchased a total of 946,637 shares at an average price of $26.41. There remains approximately $25 million in the company’s authorized share repurchase program announced on December 13, 2021.

The adjusted loss of 19 cents a share topped Wall Street’s expectations of a loss of 28 cents. Sales of $712 million topped Wall Street’s expectations of $696.58 million.

Fourth Quarter 2021 Segment Highlights
(comparisons to prior periods are calculated on a year-over-year basis)

Topgolf
Contributed $336 million in revenue and $6 million in segment operating income in Q421, driven primarily by strong walk-in traffic, continued demand for social events and better-than-expected corporate event bookings;

Same venue sales surpassed expectations in the quarter, increasing 6 percent compared to the 2019 levels and generating strong flow-through to Adjusted EBITDA; and

Opened a total of nine domestic venues in 2021, including one location in Ft. Myers, FL, during the fourth quarter of 2021.

Golf Equipment
Revenue decreased 24.5 percent year-over-year due to a planned shift in production to build a 2022 new launch product and increased operating expenses. Callaway also launched several new products in the comparable fourth quarter of 2020, creating an uneven year-over-year comparison. Compared to fourth quarter 2019 pre-pandemic levels, revenue increased 5.7 percent; and

Golf Equipment segment operating income decreased $(29) million due primarily to lower revenue compared to 2020.

Apparel, Gear and Other
Revenue increased 33.4 percent year-over-year, driven by a 39.8 percent increase in apparel sales and a 19.3 percent increase in gear and other sales across TravisMathew, Jack Wolfskin and Callaway brands; and

Operating income for the Apparel, Gear and Other segment increased $7 million year-over-year to $(2) million in the fourth quarter of 2021.

Full Year 2022 Business Outlook
The full-year 2022 projections set forth below are based on the company’s best estimates at this time. They include the estimated impact of certain factors, including

  1. the ongoing impact of COVID-19 on the supply chain and staffing levels at its Topgolf venues;
  2. changes in foreign currency effects, which are estimated to have a negative full-year impact of $54 million on net sales and $38 million on pretax income; and
  3. increased freight costs.

Full Year 2022 Outlook (in millions)
2022 Estimate | 2021 Results

  • Net Revenue
    $3,780 to $3,820
    $3,133
  • Adjusted EBITDA
    $490 to $515
    $445

Due to the timing of the Topgolf acquisition on March 8, 2021, Callaway’s reported full-year financial results for 2021 only include approximately ten months of Topgolf results and therefore do not include January and February results which were in the aggregate $142.9 million in revenue and $2.3 million in Adjusted EBITDA.

Net Revenue 

Full-year 2022 net revenue estimate assumes Topgolf segment revenue of approximately $1.5 billion for the twelve months ended December 31, 2022 and continued positive demand fundamentals for Callaway’s Golf Equipment and Apparel, Gear and Other segments.

Adjusted EBITDA

 Full-year 2022 Adjusted EBITDA estimate assumes the Topgolf segment will deliver $210 million to $220 million in Adjusted EBITDA for the twelve months ended December 31, 2022.

First Quarter 2022 Business Outlook 

The first quarter 2022 projections set forth below are based on the company’s best estimates at this time. They include the estimated impact of certain factors, including

  1. the ongoing impact of COVID-19 Omicron variant;
  2. changes in foreign currency effects, which are estimated to have a negative impact of $21 million on net sales and $21 million on pretax income (including Q1 2021 hedge gains that do not repeat); and
  3. increased freight costs.

First Quarter 2022 Outlook (in millions)
2022 Estimate | 2021 Results

  • Net Revenue
    $1,005 to $1,025
    $652
  • Adjusted EBITDA
    $130 to $145
    $128

Due to the timing of the Topgolf acquisition on March 8, 2021, Callaway’s reported full-year financial results for 2021 only include approximately ten months of Topgolf results and therefore do not include January and February results which were in the aggregate $142.9 million in revenue and $2.3 million in Adjusted EBITDA.

Photo courtesy Top Golf