Callaway Golf Company saw 2021 as a transformational year for the business, and much of it was due to the addition of Topgolf to its brand portfolio.
Management believes there has been a structural shift in the market that will benefit each of its businesses, including increased interest and participation in golf, the momentum behind casual lifestyle or power brands, and an increased desire for leisure and entertainment, such as Topgolf, hiking and camping.
Total net revenue increased 89.9 percent in the fourth quarter to $712 million, driven by the addition of Topgolf, which reportedly benefited from walk-in traffic and social event bookings, better-than-expected corporate events business and growth in the companies Apparel, Gear and Other segments. The Golf Equipment and softgoods businesses were said to be in line with the company’s guidance. Sales topped Wall Street’s expectations of $696.58 million.
Fourth-quarter sales were essentially flat, excluding the Topgolf business.
For the full year, consolidated net revenue grew 97.1 percent to $3.1 billion. Golf Equipment represented 39 percent of total revenue, Topgolf was 35 percent and Apparel, Gear and Other represented 26 percent of revenues in the quarter.
Topgolf contributed $336 million in revenue in Q4, which represented a 6 percent increase over the 2019 comp quarter. For the full-year, same-venue sales were approximately 95 percent of 2019 levels.
“A resurgence in corporate events business drove most of the same venue sales positive surprise in Q4,” explained Callaway President and CEO Chop Brewer. “Walk-in sales in smaller social events have been strong for some time and continued their trends. Having said this, as one would expect, in the last week of December and continuing into January, we have seen some softness in same venue sales as the rise in Omicron has resulted in a decline in group events and increased short-term staffing challenges. While this will impact Q1 results, it was promising to see that our U.K. venues, which experienced Omicron impacts approximately a month ahead of our U.S., venues bounce back very quickly and are now once again performing quite well. This is a good indicator of the resiliency we expect in the U.S. business through the remainder of Q1, and we are already starting to see some signs of this anticipated improvement.”
Callaway expects 2022 first quarter same-venue sales to be down slightly compared to 2019. For the full year, it anticipates low-single-digit growth over 2019 levels.
Topgolf opened nine domestic venues in 2021, including one location in Ft. Myers, FL. Callaway sees adding at least ten new Topgolf venues in 2022, with five of those scheduled for the fourth quarter. There is the potential to add a sixth location in the late fourth quarter 2022, bringing the total year tally to 10 new venues.
“We’re also extremely excited about the lineup for this year, with the first two Southern California locations opening in the Los Angeles area in Q1 and Q2—one in Ontario, which is just east of LA and the other in El Segundo, near SoFi Stadium,” detailed Brewer. “The El Segundo location is particularly intriguing as it is the first venue to include an on-course element. And in true Topgolf fashion, this will not be your typical golf course.”
Brewer said it would be a ten-hole lighted course suited for night-time rounds, incorporating entertainment elements and Toptracer technology to create a unique guest experience. Additional locations of note include Seattle and Baltimore.
The company installed over 1,700 Toptracer bays, bringing the total for the year to just under 7,000 installed. It expects to install 8,000 bays or more in 2022 but expects the game to have minimal contribution to financial results in 2022.
Topgolf contributed $6 million in segment operating income in the fourth quarter and $58 million for the year.
Golf Equipment fourth-quarter revenues were said to be in line with expectations but decreased 24.5 percent year-over-year to $161 million. The decline was due to a planned shift in production to build a 2022 new launch product and increased operating expenses. Compared to fourth quarter 2019 pre-pandemic levels, revenue increased 5.7 percent.
“As we explained last quarter, we anticipated some softness in Q4 revenues as we decided to shift production to build 2022 new launch product,” explained Brewer. “In addition, we launched several new products in the comparable fourth quarter of 2020, thus creating an uneven year-over-year comparison. As we look ahead to Q1 and the full year 2022, we see promising momentum with the launch of our new Rogue ST family of Woods & Irons and new Chrome Soft golf balls. The reception has been very positive so far.”
Brewer said pre-books are “up significantly,” and feedback on the product has been “outstanding.”
“For the full year, we are reiterating our Golf Equipment business will grow based on continued strong demand from consumers, price increases on our new launch product and the opportunity for a restocking at retail,” Brewer said.
The Golf Equipment segment posted a $25 million operating loss in Q4 compared to $4 million operating income in Q4 of the prior year due primarily to lower revenue compared to 2020.
Brewer said the company believes Golf Equipment continues to grow steadily and is an important component of its strategy moving forward. Still, the segment’s contribution is expected to shrink as Topgolf expands at the rate of ten-plus new openings per year and TravisMathew and Jack Wolfskin continue strong momentum.
Apparel, Gear and Other segment revenues increased 33.4 percent year-over-year to $215 million, 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.
“TravisMathew continued to grow at a roaring pace, with our own[ed]-retail comp store sales up over 67 percent versus 2020. E-commerce sales were also up a healthy 30 percent versus 2020,” Brewer shared.
Jack Wolfskin sales were up in the quarter compared to both 2020 and 2019.
The Callaway Apparel business in Asia continued to thrive. Brewer said the Callaway Golf brand in Japan had the No. 1 share in the wholesale channel during the quarter, and direct-to-consumer efforts paid off with strong sales in owned-retail stores as foot traffic in the region increased.
The segment posted a $2 million operating loss for the fourth quarter but saw an improvement from the $10 million loss in Q4 2020.
Adjusted EBITDA was $14 million in the fourth quarter, compared to a loss of $13 million in Q4 2020.
The company’s fourth-quarter adjusted loss of 19 cents a share topped Wall Street’s expectations of a loss of 28 cents and a loss of 33 cents per share in Q4 2020.
Callaway Golf Company sees revenues in the $3.78 billion to $3.82 billion in 2022.
“Looking ahead to 2022 and the consolidated company, we believe revenue will increase approximately 21 percent, and we expect adjusted EBITDA will be between $490 million and $515 million,” Brewed said. “This strong outlook is underpinned by our belief that our Golf Equipment business will continue to grow as participation remains high and supply continues to scale up to match exceptional consumer demand. Our strong pre-books and demand trends for [Inaudible] Apparel and Gear brands and embedded growth in the Topgolf business through new venue openings and year-over-year growth in same venue sales. Longer-term, we remain excited and confident about the direction of the business.”
First-quarter revenues are seen in the $1.005 billion to $1.025 billion range. Adjusted EBITDA is forecast in the $130 million to $145 million range.
Photo courtesy TravisMathew