Callaway Golf Company Announces Record Financial Results For Third Quarter 2021 And Increases Full Year 2021 Guidance
CARLSBAD, Calif., Nov. 9, 2021 /PRNewswire/ -- Callaway Golf Company (the "Company" or "Callaway") (NYSE:ELY) announced today its financial results for the third quarter and nine months ended September 30, 2021.
"Callaway's third quarter performance highlights the significant growth and profitability embedded in our business, as all segments have recovered more quickly than we anticipated and are delivering results ahead of plan," commented Chip Brewer, President and Chief Executive Officer of Callaway. "Our golf equipment and apparel businesses are benefiting from sustained enthusiasm for the sport of golf and outdoor exploration, while Topgolf's fun, inclusive, social environment is in high demand among customers of all skill levels and ages. This powerful combination of off-course and on-course golf, entertainment, dining and outdoor living is unlike any other company in the market today and is poised for long-term growth as we continue to execute our strategy. We are committed to driving value for our shareholders and believe our brands are well-positioned to deliver sustainable, long-term growth as we look ahead to 2022 and beyond."
GAAP AND NON-GAAP RESULTS
In addition to the Company's results prepared in accordance with GAAP, the Company provided information on a non-GAAP basis. The manner in which this non-GAAP information is derived is discussed further toward the end of this release, and the Company has provided in the tables to this release a reconciliation of the non-GAAP information to the most directly comparable GAAP information.
SUMMARY OF FINANCIAL RESULTS
The Company announced the following GAAP and non-GAAP financial results for the third quarter and nine months ended September 30, 2021 (in millions, except EPS):
GAAP RESULTS | |||||||
Q3 2021 | Q3 2020 | Change | YTD 2021 | YTD 2020 | Change | ||
Net Revenue | $856 | $476 | $381 | $2,422 | $1,215 | $1,207 | |
Income from Operations | $76 | $64 | $12 | $259 | $(73) | $332 | |
Other Income/(Expense), net | $(26) | $(6) | $(20) | $187 | $(7) | $194 | |
Income (Loss) before Income Taxes | $50 | $58 | $(8) | $446 | $(80) | $526 | |
Net Income (Loss) | $(16) | $52 | $(68) | $348 | $(86) | $434 | |
Earnings (Loss) Per Share - diluted | $(0.09) | $0.54 | $(0.63) | $2.03 | $(0.92) | $2.95 | |
NON-GAAP RESULTS | |||||||
Q3 2021 | Q3 2020 | Change | YTD 2021 | YTD 2020 | Change | ||
Net Revenue | $856 | $476 | $381 | $2,422 | $1,215 | $1,207 | |
Income from Operations | $85 | $70 | $15 | $299 | $117 | $182 | |
Other Income/(Expense), net | $(22) | $(3) | $(19) | $(54) | $(3) | $(51) | |
Income before income taxes | $63 | $67 | $(4) | $245 | $114 | $131 | |
Net Income | $26 | $59 | $(33) | $173 | $95 | $78 | |
Earnings Per Share - diluted | $0.14 | $0.61 | $(0.47) | $1.01 | $0.99 | $0.02 | |
Adjusted EBITDA | $139 | $88 | $51 | $431 | $177 | $254 | |
Third Quarter 2021 Financial Highlights
- Net revenue increase was driven by Topgolf same venue sales, which were in line with third quarter 2019 pre-pandemic levels, and higher-than-expected strength across both the Golf Equipment and Apparel, Gear and Other segments, as demand remained high for golf and outdoor activities.
- Non-GAAP income from operations increased $15 million year-over-year, led by the addition of $24 million in operating income from the Topgolf business and a $9 million increase in operating income from the Apparel, Gear and Other business, but partially offset by lower golf equipment operating income as spending levels returned to normal levels versus the lower levels seen in 2020.
- Non-GAAP other income/(expense), net decreased $(19) million to $(22) million, primarily due to a $16 million increase in interest expense related to the addition of Topgolf as well as lower hedge gains versus the prior year period.
- Non-GAAP earnings per diluted share was $0.14 in the third quarter of 2021, compared to $0.61 per share in the third quarter of 2020. Fully diluted shares were 194 million shares of common stock in the third quarter of 2021, an increase of 97 million shares compared to 97 million shares in the third quarter of 2020. The increased share count is primarily related to the issuance of additional shares in connection with the Topgolf merger.
- The Adjusted EBITDA increase of $51 million was driven by a $59 million contribution from the Topgolf business, and was partially offset by increased operating expenditures and the legacy business spending levels returned to normal levels.
- Subsequent to quarter-end, on November 1, 2021, Callaway announced a $30 million minority investment in Five Iron Golf, an emerging, privately-owned, urban indoor golf and entertainment company offering simulator rentals, golf lessons, custom club fittings, social events and a curated food and beverage menu.
SEGMENT RESULTS
The following is a reconciliation of income before income taxes to total segment operating income (in millions) for the third quarter and nine months of 2021 and 2020:
Q3 | Q3 | Change | YTD | YTD | Change | ||
Total segment operating income | $104 | 83 | $21 | $352 | $155 | $197 | |
Reconciling items* | $(28) | $(19) | $(9) | $(92) | $(54) | $(38) | |
Goodwill and Trademark Impairment | $— | $— | $— | $— | $(174) | $174 | |
Income from Operations | $76 | $64 | $12 | $259 | $(73) | $332 | |
Gain on Topgolf Investment | $— | $— | $— | $253 | $— | $253 | |
Interest Expense | $(29) | $(13) | $(16) | $(75) | $(34) | $(41) | |
Other Income | $3 | $7 | $(4) | $9 | $27 | $(18) | |
Income before income taxes | $50 | $58 | $(8) | $446 | $(80) | $526 |
*Reconciling items exclude corporate overhead and certain non-recurring and non-cash items as described in the schedules to this release. |
Third Quarter 2021 Segment Highlights
- Topgolf
- Contributed $334 million of revenue and $24 million of segment operating income in the third quarter of 2021, driven primarily by strong domestic venue walk-in traffic, better-than-expected event bookings, and new incremental venue openings
- Same venue sales surpassed expectations in the quarter, increasing to approximately 100% of the 2019 level and generating strong flow-through to Adjusted EBITDA
- Opened eight new domestic locations in the first nine months of 2021, including two locations opened during the third quarter of 2021; one additional planned location expected to open in the fourth quarter of 2021
- Golf equipment
- Revenue increased 8.4% year-over-year and 37.6% compared to third quarter 2019 pre-pandemic levels, driven by the continued strong demand for golf products and participation in the game and improved supply chain performance
- Golf club sales increased 9.5% year-over-year and 36.5% compared to third quarter 2019 pre-pandemic levels, amid significant growth in sales volume across all major product categories resulting from continued unprecedented momentum in the golf business and the success of the new EPIC woods and APEX irons, which outweighed supply chain disruptions
- Golf ball sales increased 4.1% during the quarter and 41.8% compared to third quarter 2019 pre-pandemic levels, as demand and market share increased
- Golf Equipment segment operating income decreased 19.3% due to higher freight costs and a return to more normal levels of spend
- Apparel, Gear and Other
- Revenue increased 11.9% year-over-year, driven by a 19.6% increase in apparel sales across TravisMathew, Jack Wolfskin and Callaway brands, despite global supply chain headwinds
- Operating income for the Apparel, Gear and Other segment increased $9 million year-over-year to $35 million in the third quarter of 2021
The table below provides the breakout of segment revenues and segment operating income for the third quarter and nine months ended September 30, 2021:
Segment Net Revenue | Q3 | Q3 | Change | YTD | YTD | Change | |
Topgolf | $334 | $— | $334 | $752 | $— | $752 | |
Golf Equipment | $290 | $267 | $23 | $1,068 | $769 | $299 | |
Apparel, Gear and Other | $233 | $208 | $25 | $602 | $446 | $156 | |
Total Segment Net Revenue | $856 | $476 | $381 | $2,422 | $1,215 | $1,207 |
Total Segment Operating Income | Q3 | Q3 | Change | YTD | YTD | Change | |
Topgolf | $24 | $— | $24 | $52 | $— | $52 | |
% of segment revenue | 7.2% | — | — | 6.9% | — | — | |
Golf Equipment | $46 | $57 | $(11) | $229 | $145 | $84 | |
% of segment revenue | 15.9% | 21.3% | (540) bps | 21.4% | 18.9% | 250 bps | |
Apparel, Gear and Other | $35 | $26 | $9 | $71 | $10 | $61 | |
% of segment revenue | 15.0% | 12.5% | 250 bps | 11.8% | 2.2% | 960 bps | |
Total segment operating income | $104 | $83 | $21 | $352 | $155 | $197 | |
% of segment revenue | 12.1% | 17.4% | (530) bps | 14.5% | 12.8% | 170 bps |
BUSINESS OUTLOOK
The full year 2021 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) ongoing impact of COVID-19 on the supply chain, (2) changes in foreign currency effects, which are estimated to have a positive full year impact of $33 million on net sales, and (3) 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 approximately ten 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.
FULL YEAR 2021 | ||||
(in millions) | Current 2021 | Previous 2021 | 2020 | 2019 |
Net Revenue | $3,110 - $3,120 | $3,065 - $3,095 | $1,590 | $1,701 |
Adjusted EBITDA | $424 - $430 | $370 - $390 | $163 | $210 |
Net Revenue: Full year 2021 net revenue estimate assumes Topgolf segment revenue for the 10 months beginning March 8, 2021 slightly above 2019 full year levels of $1,059 million, as well as continued positive demand fundamentals for Callaway's Golf Equipment and Apparel, Gear and Other segments, as well as improved supply in Golf Equipment in the fourth quarter.
Adjusted EBITDA: Full year 2021 Adjusted EBITDA estimate assumes the Topgolf segment will deliver approximately $158 million in Adjusted EBITDA for the ten months beginning March 8, 2021, amid strong revenue flow-through.
ADDITIONAL INFORMATION AND DISCLOSURES
Conference Call and Webcast
The Company will be holding a conference call at 2:00 p.m. Pacific time today, November 9, 2021, to discuss the Company's financial results, outlook and business. The call will be broadcast live over the Internet and can be accessed at http://ir.callawaygolf.com/. A replay of the conference call will be available approximately two hours after the call ends, and will remain available through 9:00 p.m. Pacific time on November 16, 2021. The replay may be accessed through the Internet at http://ir.callawaygolf.com/.
Non-GAAP Information
The GAAP results contained in this press release and the financial statement schedules attached to this press release have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). To supplement the GAAP results, the Company has provided certain non-GAAP financial information as follows:
Constant Currency Basis. The Company provided certain information regarding the Company's financial results or projected financial results on a "constant currency basis." This information estimates the impact of changes in foreign currency rates on the translation of the Company's current or projected future period financial results as compared to the applicable comparable period. This impact is derived by taking the current or projected local currency results and translating them into U.S. dollars based upon the foreign currency exchange rates for the applicable comparable period. It does not include any other effect of changes in foreign currency rates on the Company's results or business.
Non-Recurring and Non-cash Adjustments. The Company provided information excluding certain non-cash amortization of intangibles and other assets related to the Company's acquisitions, non-recurring transaction and transition costs related to acquisitions, severance costs related to the Company's cost-reduction initiatives, and other non-recurring costs, including costs related to the merger and integration with Topgolf, transition to the Company's new North American Distribution Center, implementation of new IT systems, the cumulative $39 million non-cash valuation allowance recorded against certain of the Company's deferred tax assets as a result of the Topgolf merger, the $253 million non-cash gain as the result of the Company's prior equity position in Topgolf, the $174 million non-cash impairment charge related to the Jack Wolfskin goodwill and trade name, as well as non-cash amortization of the debt discount related to the Company's convertible notes.
Adjusted EBITDA. The Company provides information about its results excluding interest, taxes, depreciation and amortization expenses, non-cash stock compensation expense, non-cash lease amortization expense, and the non-recurring and non-cash items referenced above.
In addition, the Company has included in the schedules attached to this release a reconciliation of certain non-GAAP information to the most directly comparable GAAP information. The non-GAAP information presented in this release and related schedules should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP. The non-GAAP information may also be inconsistent with the manner in which similar measures are derived or used by other companies. Management uses such non-GAAP information for financial and operational decision-making purposes and as a means to evaluate period-over-period comparisons and in forecasting the Company's business going forward. Management believes that the presentation of such non-GAAP information, when considered in conjunction with the most directly comparable GAAP information, provides additional useful comparative information for investors in their assessment of the underlying performance of the Company's business with regard to these items. The Company has provided reconciling information in the attached schedules.
Definitions
Same venue sales. Callaway defines same venue sales for its Topgolf business as sales for the comparable venue base, which is defined as the number of Company-operated venues with at least 24 full fiscal months of operations.
Forward-Looking Statements
Statements used in this press release that relate to future plans, events, financial results, performance, prospects, or growth opportunities, including statements relating to the Company's and Topgolf's full year 2021 guidance (including revenue and Adjusted EBITDA), continued impact of the COVID-19 pandemic on the Company's business and the Company's ability to improve and recover from such impact, impact of any measures taken to mitigate the effect of the pandemic, strength and demand of the Company's products and services, continued brand momentum, demand for golf and outdoor activities and apparel, continued investments in the business, increases in shareholder value, post-pandemic consumer trends and behavior, future industry and market conditions, the benefits of the Topgolf merger, including the anticipated operations, financial position, liquidity, performance, prospects or growth and scale opportunities of the Company, Topgolf or the combined company, and statements of belief and any statement of assumptions underlying any of the foregoing, are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "estimate," "could," "should," "intend," "may," "plan," "seek," "anticipate," "project" and similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made and are not guarantees of future performance. These statements are based upon current information and expectations. Accurately estimating the forward-looking statements is based upon various risks and unknowns, including disruptions to business operations from additional regulatory restrictions in response to the COVID-19 pandemic (such as travel restrictions, government-mandated shut-down orders or quarantines) or voluntary "social distancing" that affects employees, customers and suppliers; costs, expenses or difficulties related to the merger with Topgolf, including the integration of the Topgolf business; failure to realize the expected benefits and synergies of the Topgolf merger in the expected timeframes or at all; production delays, closures of manufacturing facilities, retail locations, warehouses and supply and distribution chains; staffing shortages as a result of remote working requirements or otherwise; uncertainty regarding global economic conditions, particularly the uncertainty related to the duration and ongoing impact of the COVID-19 pandemic, and related decreases in customer demand/spending and ongoing increases in operating and freight costs; global supply chain constraints and challenges; the Company's level of indebtedness; continued availability of credit facilities and liquidity and ability to comply with applicable debt covenants; effectiveness of capital allocation and cost/expense reduction efforts; continued brand momentum and product success; growth in the direct-to-consumer and e-commerce channels; ability to realize the benefits of the continued investments in the Company's business; consumer acceptance of and demand for the Company's and its subsidiaries' products and services; cost of living and inflationary pressures; any changes in U.S. trade, tax or other policies, including restrictions on imports or an increase in import tariffs; future consumer discretionary purchasing activity, which can be significantly adversely affected by unfavorable economic or market conditions; future retailer purchasing activity, which can be significantly negatively affected by adverse industry conditions and overall retail inventory levels; and future changes in foreign currency exchange rates and the degree of effectiveness of the Company's hedging programs. Actual results may differ materially from those estimated or anticipated as a result of these risks and unknowns or other risks and uncertainties, including the effect of terrorist activity, armed conflict, natural disasters or pandemic diseases, including expanded outbreak of COVID-19 and its variants, on the economy generally, on the level of demand for the Company's and its subsidiaries' products and services or on the Company's ability to manage its operations, supply chain and delivery logistics in such an environment; delays, difficulties or increased costs in the supply of components or commodities needed to manufacture the Company's products or in manufacturing the Company's products; and a decrease in participation levels in golf generally, during or as a result of the COVID-19 pandemic. For additional information concerning these and other risks and uncertainties that could affect these statements and the Company's business, see the Company's Annual Report on Form 10-K for the year ended December 31, 2020 as well as other risks and uncertainties detailed from time to time in the Company's reports on Forms 10-Q and 8-K subsequently filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
About Callaway Golf Company
Callaway Golf Company (NYSE:ELY) is an unrivaled tech-enabled golf company delivering leading golf equipment, apparel and entertainment, with a portfolio of global brands including Callaway Golf, Topgolf, Odyssey, OGIO, TravisMathew and Jack Wolfskin. Through an unwavering commitment to innovation, Callaway manufactures and sells premium golf clubs, golf balls, golf and lifestyle bags, golf and lifestyle apparel and other accessories, and provides world-class golf entertainment experiences through Topgolf, its wholly-owned subsidiary. For more information please visit www.callawaygolf.com, www.topgolf.com, www.odysseygolf.com, www.OGIO.com, www.travismathew.com, and www.jack-wolfskin.com.
Investor Contacts
Brian Lynch
Lauren Scott
(760) 931-1771
[email protected]
CALLAWAY GOLF COMPANY | |||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | |||||||||
(Unaudited) | |||||||||
(In thousands) | |||||||||
September 30, | December 31, | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 508,177 | $ | 366,119 | |||||
Restricted Cash | 1,754 | — | |||||||
Accounts receivable, net | 255,223 | 138,482 | |||||||
Inventories | 385,311 | 352,544 | |||||||
Other current assets | 188,946 | 55,482 | |||||||
Total current assets | 1,339,411 | 912,627 | |||||||
Property, plant and equipment, net | 1,330,326 | 146,495 | |||||||
Operating lease right-of-use assets, net | 1,066,124 | 194,776 | |||||||
Intangible assets, net | 3,562,222 | 540,997 | |||||||
Other assets | 99,296 | 185,705 | |||||||
Total assets | $ | 7,397,379 | $ | 1,980,600 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable and accrued expenses | $ | 453,638 | $ | 276,209 | |||||
Accrued employee compensation and benefits | 115,946 | 30,937 | |||||||
Asset-based credit facilities | 30,108 | 22,130 | |||||||
Current operating lease liabilities | 55,507 | 29,579 | |||||||
Construction advances | 54,264 | — | |||||||
Deferred revenue | 84,359 | 2,546 | |||||||
Other current liabilities | 46,333 | 29,871 | |||||||
Total current liabilities | 840,155 | 391,272 | |||||||
Long-term debt | 1,049,019 | 650,564 | |||||||
Long-term operating leases | 1,181,443 | 177,996 | |||||||
Deemed landlord financing | 312,027 | — | |||||||
Deferred tax liability | 241,205 | 58,628 | |||||||
Long-term liabilities | 51,604 | 26,496 | |||||||
Total Callaway Golf Company shareholders' equity | 3,721,926 | 675,644 | |||||||
Total liabilities and shareholders' equity | $ | 7,397,379 | $ | 1,980,600 | |||||
CALLAWAY GOLF COMPANY | |||||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | |||||||
(Unaudited) | |||||||
(In thousands, except per share data) | |||||||
Three Months Ended | |||||||
2021 | 2020 | ||||||
Net revenues: | |||||||
Products | $ | 527,064 | $ | 475,559 | |||
Services | 329,397 | — | |||||
Total net revenues | 856,461 | 475,559 | |||||
Costs and expenses: | |||||||
Cost of products | 288,364 | 274,826 | |||||
Cost of services, excluding depreciation and amortization | 40,070 | — | |||||
Other venue expenses | 215,841 | — | |||||
Selling, general and administrative expense | 217,736 | 127,085 | |||||
Research and development expense | 15,753 | 10,139 | |||||
Venue pre-opening costs | 2,687 | — | |||||
Total costs and expenses | 780,451 | 412,050 | |||||
Income from operations | 76,010 | 63,509 | |||||
Other expense, net | (25,772) | (5,717) | |||||
Income before income taxes | 50,238 | 57,792 | |||||
Income tax provision | 66,229 | 5,360 | |||||
Net income (loss) | $ | (15,991) | $ | 52,432 | |||
Earnings (loss) per common share: | |||||||
Basic | $(0.09) | $0.56 | |||||
Diluted | $(0.09) | $0.54 | |||||
Weighted-average common shares outstanding: | |||||||
Basic | 185,963 | 94,171 | |||||
Diluted | 185,963 | 96,612 | |||||
Nine Months Ended | |||||||
2021 | 2020 | ||||||
Net revenues: | |||||||
Products | $ | 1,678,432 | $ | 1,214,831 | |||
Services | 743,291 | — | |||||
Total net revenues | 2,421,723 | 1,214,831 | |||||
Costs and expenses: | |||||||
Cost of products | 914,002 | 696,369 | |||||
Cost of services, excluding depreciation and amortization | 93,841 | — | |||||
Other venue expenses | 483,617 | — | |||||
Selling, general and administrative expense | 612,740 | 384,054 | |||||
Research and development expense | 48,769 | 33,399 | |||||
Goodwill and tradename impairment | — | 174,269 | |||||
Venue pre-opening costs | 9,376 | — | |||||
Total costs and expenses | 2,162,345 | 1,288,091 | |||||
Income (loss) from operations | 259,378 | (73,260) | |||||
Gain on Topgolf investment | 252,531 | — | |||||
Other expense, net | (65,576) | (6,518) | |||||
Income (loss) before income taxes | 446,333 | (79,778) | |||||
Income tax provision | 98,119 | 6,580 | |||||
Net income (loss) | $ | 348,214 | $ | (86,358) | |||
Earnings (loss) per common share: | |||||||
Basic | $2.13 | $(0.92) | |||||
Diluted | $2.03 | $(0.92) | |||||
Weighted-average common shares outstanding: | |||||||
Basic | 163,141 | 94,207 | |||||
Diluted | 171,194 | 94,207 | |||||
_________________________________ |
On March 8, 2021, the Company completed its merger with Topgolf International, Inc. ("Topgolf") and has included the results of operations for Topgolf in its consolidated condensed statements of operations from that date forward. Additionally, the Company has modified the presentation of its consolidated condensed statements of operations for the three and nine months ended September 30, 2021 and 2020 to provide investors with additional information to assess the performance of the combined entity. |
CALLAWAY GOLF COMPANY | |||||||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW | |||||||
(Unaudited) | |||||||
(In thousands) | |||||||
Nine Months Ended | |||||||
2021 | 2020 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 348,214 | $ | (86,358) | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 107,919 | 28,668 | |||||
Lease amortization expense | 45,996 | 24,293 | |||||
Amortization of debt issuance costs | 4,042 | 3,024 | |||||
Debt discount amortization | 10,255 | 3,857 | |||||
Impairment loss | — | 174,269 | |||||
Deferred taxes, net | 86,982 | (117) | |||||
Non-cash share-based compensation | 27,113 | 8,066 | |||||
Loss on disposal of long-lived assets | 194 | 297 | |||||
Gain on Topgolf investment | (252,531) | — | |||||
Gain on conversion of note receivable | — | (1,252) | |||||
Unrealized net gains on hedging instruments and foreign currency | (2,659) | (8,899) | |||||
Acquisition costs | (16,199) | — | |||||
Changes in assets and liabilities | (112,522) | (23,297) | |||||
Net cash provided by operating activities | 246,804 | 122,551 | |||||
Cash flows from investing activities: | |||||||
Cash acquired in merger | 171,294 | — | |||||
Capital expenditures | (198,896) | (30,911) | |||||
Investment in golf-related ventures | — | (19,999) | |||||
Proceeds from sale of investment in golf-related ventures | 18,591 | — | |||||
Proceeds from sale of property and equipment | — | 8 | |||||
Net cash used in investing activities | (9,011) | (50,902) | |||||
Cash flows from financing activities: | |||||||
Repayments of long-term debt | (160,860) | (8,203) | |||||
Proceeds from issuance of long-term debt | 20,000 | 37,728 | |||||
Proceeds from (repayments of) credit facilities, net | 7,978 | (114,345) | |||||
Proceeds from issuance of convertible notes | — | 258,750 | |||||
Premium paid for capped call confirmations | — | (31,775) | |||||
Debt issuance cost | (5,441) | (9,143) | |||||
Payment on contingent earn-out obligation | (3,577) | — | |||||
Repayments of financing leases | (465) | (530) | |||||
Proceeds from lease financing | 49,508 | — | |||||
Exercise of stock options | 19,520 | 130 | |||||
Dividends paid | (3) | (1,891) | |||||
Acquisition of treasury stock | (12,938) | (22,143) | |||||
Net cash (used in) provided by financing activities | (86,278) | 108,578 | |||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (3,775) | (237) | |||||
Net increase in cash, cash equivalents and restricted cash | 147,740 | 179,990 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 366,119 | 106,666 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 513,859 | $ | 286,656 | |||
CALLAWAY GOLF COMPANY | ||||||||||||||||
Consolidated Net Sales and Operating Segment Information | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Net Revenues by Product Category(2) | ||||||||||||||||
Three Months Ended | Growth | Non-GAAP | ||||||||||||||
2021 | 2020 | Dollars | Percent | Percent | ||||||||||||
Net revenues: | ||||||||||||||||
Venues | $ | 313,640 | $ | — | $ | 313,640 | n/a | n/a | ||||||||
Topgolf other business lines | 20,143 | — | 20,143 | n/a | n/a | |||||||||||
Golf clubs | 229,346 | 209,356 | 19,990 | 9.5% | 9.1% | |||||||||||
Golf balls | 60,269 | 57,921 | 2,348 | 4.1% | 3.4% | |||||||||||
Apparel | 150,240 | 125,609 | 24,631 | 19.6% | 18.5% | |||||||||||
Gear and other | 82,823 | 82,673 | 150 | 0.2% | -0.1% | |||||||||||
Total net revenues | $ | 856,461 | $ | 475,559 | $ | 380,902 | 80.1% | 79.2% | ||||||||
(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S. | ||||||||||||||||
(2) On March 8, 2021, the Company completed its merger with Topgolf. Accordingly, the Company's revenue categories for 2021 were expanded to include Topgolf's revenue categories. | ||||||||||||||||
Net Revenues by Region | ||||||||||||||||
Three Months Ended | Growth | Non-GAAP | ||||||||||||||
2021 | 2020 | Dollars | Percent | Percent | ||||||||||||
Net revenues: | ||||||||||||||||
United States | $ | 552,895 | $ | 214,619 | $ | 338,276 | 157.6% | 157.6% | ||||||||
Europe | 157,215 | 134,680 | 22,535 | 16.7% | 14.2% | |||||||||||
Japan | 63,441 | 56,530 | 6,911 | 12.2% | 16.5% | |||||||||||
Rest of world | 82,910 | 69,730 | 13,180 | 18.9% | 14.5% | |||||||||||
Total net revenues | $ | 856,461 | $ | 475,559 | $ | 380,902 | 80.1% | 79.2% | ||||||||
(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S. | ||||||||||||||||
Operating Segment Information | ||||||||||||||||
Three Months Ended | Growth | Non-GAAP | ||||||||||||||
2021 | 2020 | Dollars | Percent | Percent | ||||||||||||
Net revenues: | ||||||||||||||||
Topgolf | $ | 333,783 | $ | — | $ | 333,783 | n/a | n/a | ||||||||
Golf equipment | 289,615 | 267,277 | 22,338 | 8.4% | 7.9% | |||||||||||
Apparel, gear and other | 233,063 | 208,282 | 24,781 | 11.9% | 11.1% | |||||||||||
Total net revenues | $ | 856,461 | $ | 475,559 | $ | 380,902 | 80.1% | 79.2% | ||||||||
Segment operating income (loss): | ||||||||||||||||
Topgolf | $ | 23,928 | $ | — | $ | 23,928 | n/a | |||||||||
Golf equipment | 45,815 | 56,784 | (10,969) | -19.3% | ||||||||||||
Apparel, gear and other | 34,634 | 25,909 | 8,725 | 33.7% | ||||||||||||
Total segment operating income | 104,377 | 82,693 | 21,684 | 26.2% | ||||||||||||
Corporate G&A and other(2) | (28,367) | (19,184) | (9,183) | 47.9% | ||||||||||||
Total operating income | 76,010 | 63,509 | 12,501 | 19.7% | ||||||||||||
Interest expense, net | (28,730) | (12,727) | (16,003) | 125.7% | ||||||||||||
Other income, net | 2,958 | 7,010 | (4,052) | -57.8% | ||||||||||||
Total income before income taxes | $ | 50,238 | $ | 57,792 | $ | (7,554) | -13.1% | |||||||||
(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S. | ||||||||||||||||
(2) Amount includes corporate general and administrative expenses not utilized by management in determining segment profitability, including non-cash amortization expense for intangible assets acquired in connection with the Jack Wolfskin, TravisMathew and OGIO acquisitions. In addition, the amount for 2021 includes (i) $1.4 million of transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021; (ii) $5.4 million of non-cash amortization expense for intangible assets acquired in connection with the merger with Topgolf, combined with depreciation expense from the fair value step-up of Topgolf property, plant and equipment and amortization expense related to the fair value adjustments to Topgolf leases; and (iii) $0.5 million of costs related to the implementation of new IT systems for Jack Wolfskin. The amount for the third quarter of 2020 includes (i) $2.3 million of non-recurring costs associated with the Company's transition to the new North America Distribution Center; (ii) $1.5 million of professional and legal fees associated with the acquisition of Topgolf; (iii) $0.5 million of costs related to the implementation of new IT systems for Jack Wolfskin; and (iv) $0.7 million of cost reductions initiatives, including severance charges associated with workforce reductions due to the COVID-19 pandemic. | ||||||||||||||||
CALLAWAY GOLF COMPANY | ||||||||||||||||
Consolidated Net Sales and Operating Segment Information | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Net Revenues by Product Category(2) | ||||||||||||||||
Nine Months Ended | Growth | Non-GAAP | ||||||||||||||
2021 | 2020 | Dollars | Percent | Percent | ||||||||||||
Net revenues: | ||||||||||||||||
Venues | $ | 702,234 | $ | — | $ | 702,234 | n/a | n/a | ||||||||
Topgolf other business lines | 49,639 | — | 49,639 | n/a | n/a | |||||||||||
Golf clubs | 865,671 | 616,620 | 249,051 | 40.4% | 37.7% | |||||||||||
Golf balls | 202,085 | 152,261 | 49,824 | 32.7% | 30.2% | |||||||||||
Apparel | 336,942 | 239,201 | 97,741 | 40.9% | 37.4% | |||||||||||
Gear and other | 265,152 | 206,749 | 58,403 | 28.2% | 25.1% | |||||||||||
Total net revenues | $ | 2,421,723 | $ | 1,214,831 | $ | 1,206,892 | 99.3% | 96.1% | ||||||||
(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S. | ||||||||||||||||
(2) On March 8, 2021, the Company completed its merger with Topgolf. Accordingly, the Company's revenue categories for 2021 were expanded to include Topgolf's revenue categories. | ||||||||||||||||
Net Revenues by Region | ||||||||||||||||
Nine Months Ended | Growth | Non-GAAP | ||||||||||||||
2021 | 2020 | Dollars | Percent | Percent | ||||||||||||
Net revenues: | ||||||||||||||||
United States | $ | 1,583,874 | $ | 603,836 | $ | 980,038 | 162.3% | 162.3% | ||||||||
Europe | 386,559 | 281,473 | 105,086 | 37.3% | 29.0% | |||||||||||
Japan | 197,188 | 158,517 | 38,671 | 24.4% | 25.5% | |||||||||||
Rest of world | 254,102 | 171,005 | 83,097 | 48.6% | 38.6% | |||||||||||
Total net revenues | $ | 2,421,723 | $ | 1,214,831 | $ | 1,206,892 | 99.3% | 96.1% | ||||||||
(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S. | ||||||||||||||||
Operating Segment Information | ||||||||||||||||
Nine Months Ended | Growth | Non-GAAP | ||||||||||||||
2021 | 2020 | Dollars | Percent | Percent | ||||||||||||
Net revenues: | ||||||||||||||||
Topgolf | $ | 751,873 | $ | — | $ | 751,873 | n/a | n/a | ||||||||
Golf equipment | 1,067,756 | 768,881 | 298,875 | 38.9% | 36.2% | |||||||||||
Apparel, gear and other | 602,094 | 445,950 | 156,144 | 35.0% | 31.7% | |||||||||||
Total net revenues | $ | 2,421,723 | $ | 1,214,831 | $ | 1,206,892 | 99.3% | 96.1% | ||||||||
Segment operating income (loss): | ||||||||||||||||
Topgolf | $ | 52,086 | $ | — | $ | 52,086 | n/a | |||||||||
Golf equipment | 228,825 | 144,585 | 84,240 | 58.3% | ||||||||||||
Apparel, gear and other | 70,792 | 10,399 | 60,393 | 580.8% | ||||||||||||
Total segment operating income | 351,703 | 154,984 | 196,719 | 126.9% | ||||||||||||
Corporate G&A and other(2) | (92,325) | (53,975) | (38,350) | 71.1% | ||||||||||||
Goodwill and tradename impairment(3) | — | (174,269) | 174,269 | -100.0% | ||||||||||||
Total operating income (loss) | 259,378 | (73,260) | 332,638 | 454.1% | ||||||||||||
Gain on Topgolf investment(4) | 252,531 | — | 252,531 | n/a | ||||||||||||
Interest expense, net | (75,063) | (34,005) | (41,058) | 120.7% | ||||||||||||
Other income, net | 9,487 | 27,487 | (18,000) | -65.5% | ||||||||||||
Total income (loss) before income taxes | $ | 446,333 | $ | (79,778) | $ | 526,111 | 659.5% | |||||||||
(1) Calculated by applying 2020 exchange rates to 2021 reported sales in regions outside the U.S. | ||||||||||||||||
(2) Amount includes corporate general and administrative expenses not utilized by management in determining segment profitability, including non-cash amortization expense for intangible assets acquired in connection with the Jack Wolfskin, TravisMathew and OGIO acquisitions. In addition, the amount for 2021 includes (i) $20.1 million of transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021, (ii) $13.9 million of non-cash amortization expense for intangible assets acquired in connection with the merger with Topgolf, combined with depreciation expense from the fair value step-up of Topgolf property, plant and equipment and amortization expense related to the fair value adjustments to Topgolf leases, and (iii) $2.0 million of costs related to the implementation of new IT systems for Jack Wolfskin. The amount for 2020 also includes certain non-recurring costs, including (i) $5.3 million of costs associated with the Company's transition to its new North America Distribution Center; (ii) $1.5m of professional fees and legal expenses associated with the acquisition of Topgolf; (iii) $0.9 million related to the implementation of new IT systems for Jack Wolfskin, and (iv) $4.8 million related to cost-reduction initiatives, including severance charges associated with workforce reductions due to the COVID-19 pandemic. | ||||||||||||||||
(3) Represents an impairment charge related to Jack Wolfskin recognized in the second quarter of 2020. | ||||||||||||||||
(4) Amount represents a gain recorded to write-up the Company's former investment in Topgolf to its fair value in connection with the merger. | ||||||||||||||||
CALLAWAY GOLF COMPANY | ||||||||||||||||||||||||||||
Consolidated Net Sales and Operating Segment Information | ||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Operating Segment Information | ||||||||||||||||||||||||||||
Three Months Ended | Growth | Nine Months Ended | Growth | |||||||||||||||||||||||||
2021 | 2019 | Dollars | Percent | 2021 | 2019 | Dollars | Percent | |||||||||||||||||||||
Net revenues: | ||||||||||||||||||||||||||||
Topgolf | $ | 333,783 | $ | — | $ | 333,783 | n/a | $ | 751,873 | $ | — | $ | 751,873 | n/a | ||||||||||||||
Golf equipment | 289,615 | 210,502 | 79,113 | 37.6% | 1,067,756 | 826,474 | 241,282 | 29.2% | ||||||||||||||||||||
Apparel, gear and other | 233,063 | 215,715 | 17,348 | 8.0% | 602,094 | 562,648 | 39,446 | 7.0% | ||||||||||||||||||||
Total net revenues | $ | 856,461 | $ | 426,217 | $ | 430,244 | 100.9% | $ | 2,421,723 | $ | 1,389,122 | $ | 1,032,601 | 74.3% | ||||||||||||||
Segment operating income (loss): | ||||||||||||||||||||||||||||
Topgolf | $ | 23,928 | $ | — | $ | 23,928 | n/a | $ | 52,086 | $ | — | $ | 52,086 | n/a | ||||||||||||||
Golf equipment | 45,815 | 23,124 | 22,691 | 98.1% | 228,825 | 148,782 | 80,043 | 53.8% | ||||||||||||||||||||
Apparel, gear and other | 34,634 | 34,877 | (243) | -0.7% | 70,792 | 68,909 | 1,883 | 2.7% | ||||||||||||||||||||
Total segment operating income | 104,377 | 58,001 | 46,376 | 80.0% | 351,703 | 217,691 | 134,012 | 61.6% | ||||||||||||||||||||
Corporate G&A and other(1) | (28,367) | (17,512) | (10,855) | 62.0% | (92,325) | (62,367) | (29,958) | 48.0% | ||||||||||||||||||||
Total operating income | 76,010 | 40,489 | 35,521 | 87.7% | 259,378 | 155,324 | 104,054 | 67.0% | ||||||||||||||||||||
Gain on Topgolf investment(2) | — | — | — | n/a | 252,531 | — | 252,531 | n/a | ||||||||||||||||||||
Interest expense, net | (28,730) | (9,545) | (19,185) | 201.0% | (75,063) | (29,444) | (45,619) | 154.9% | ||||||||||||||||||||
Other income, net | 2,958 | 2,232 | 726 | 32.5% | 9,487 | 1,459 | 8,028 | 550.2% | ||||||||||||||||||||
Total income before income taxes | $ | 50,238 | $ | 33,176 | $ | 17,062 | 51.4% | $ | 446,333 | $ | 127,339 | $ | 318,994 | 250.5% | ||||||||||||||
(1) Amount includes corporate general and administrative expenses not utilized by management in determining segment profitability, including non-cash amortization expense for intangible assets acquired in connection with the Jack Wolfskin, TravisMathew and OGIO acquisitions. In addition, the amount for the three and nine months ended September 30, 2021 includes (i) $1.4 million and $20.1 million, respectively, of transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021; (ii) $5.4 million and $13.9 million, respectively, of non-cash amortization expense for intangible assets acquired in connection with the merger with Topgolf, combined with depreciation expense from the fair value step-up of Topgolf property, plant and equipment and amortization expense related to the fair value adjustments to Topgolf leases; and (iii) $0.5 million and $2.0 million, respectively, of costs related to the implementation of new IT systems for Jack Wolfskin. The amount for the three and nine months ended September 30, 2019 also includes $3.0 million and $13.2 million, respectively, of non-recurring transaction fees and transition costs associated with the acquisition of Jack Wolfskin completed in January 2019, as well as other non-recurring advisory fees. | ||||||||||||||||||||||||||||
(2) Amount represents a gain recorded to write up the Company's former investment in Topgolf to its fair value in connection with the merger. | ||||||||||||||||||||||||||||
CALLAWAY GOLF COMPANY | |||||||||||||||||||||||||||||||||||||||||||
Supplemental Financial Information and Non-GAAP Reconciliation | |||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||
GAAP | Non-Cash | Non-Cash | Acquisition | Tax | Non- | GAAP | Non-Cash | Non-Cash | Other Non- | Non-GAAP | |||||||||||||||||||||||||||||||||
Net revenues | $ | 856,461 | $ | — | $ | — | $ | — | $ | — | $ | 856,461 | $ | 475,559 | $ | — | $ | — | $ | — | $ | 475,559 | |||||||||||||||||||||
Total costs and expenses | 780,451 | 6,654 | — | 1,875 | — | 771,922 | 412,050 | 1,235 | — | 5,088 | 405,727 | ||||||||||||||||||||||||||||||||
Income (loss) from operations | 76,010 | (6,654) | — | (1,875) | — | 84,539 | 63,509 | (1,235) | — | (5,088) | 69,832 | ||||||||||||||||||||||||||||||||
Other income/(expense), net | (25,772) | (941) | (2,663) | (306) | — | (21,862) | (5,717) | — | (2,415) | — | (3,302) | ||||||||||||||||||||||||||||||||
Income tax provision (benefit) | 66,229 | (1,823) | (639) | (523) | 32,799 | 36,415 | 5,360 | (284) | (555) | (1,170) | 7,369 | ||||||||||||||||||||||||||||||||
Net income (loss) | $ | (15,991) | $ | (5,772) | $ | (2,024) | $ | (1,658) | $ | (32,799) | $ | 26,262 | $ | 52,432 | $ | (951) | $ | (1,860) | $ | (3,918) | $ | 59,161 | |||||||||||||||||||||
Diluted earnings (loss) per share: | $ | (0.09) | $ | (0.03) | $ | (0.01) | $ | (0.01) | $ | (0.18) | $ | 0.14 | $ | 0.54 | $ | (0.01) | $ | (0.02) | $ | (0.04) | $ | 0.61 | |||||||||||||||||||||
Diluted weighted-average shares outstanding: | 185,963 | 185,963 | 185,963 | 185,963 | 185,963 | 193,925 | 96,612 | 96,612 | 96,612 | 96,612 | 96,612 | ||||||||||||||||||||||||||||||||
(1) Represents non-cash amortization expense of intangible assets in connection with the acquisitions of OGIO, TravisMathew and Jack Wolfskin. 2021 also includes non-cash amortization of Topgolf intangible assets, depreciation expense from the fair value step-up of Topgolf property, plant and equipment and amortization expense related to the fair value adjustments to Topgolf leases and Topgolf debt, all recorded in connection with the Topgolf merger. | |||||||||||||||||||||||||||||||||||||||||||
(2) Represents the non-cash amortization of the debt discount on the Company's convertible notes issued in May 2020. | |||||||||||||||||||||||||||||||||||||||||||
(3) In 2021, non-recurring costs include transition costs associated with the Topgolf merger and costs related to the implementation of new IT systems for Jack Wolfskin. In 2020, non-recurring costs include costs associated with the Company's transition to its new North America Distribution Center, costs associated with the acquisition of Topgolf, implementation of new IT systems for Jack Wolfskin, and severance related to the Company's cost reduction initiatives. | |||||||||||||||||||||||||||||||||||||||||||
(4) As Topgolf's losses exceed Callaway's income in prior years, the Company has recorded a valuation allowance against certain of its deferred tax assets until the Company can demonstrate sustained cumulative earnings. | |||||||||||||||||||||||||||||||||||||||||||
(5) Non-GAAP diluted earnings per share for the three months ended September 30, 2021 was calculated using the diluted weighted average outstanding shares, as earnings on a non-GAAP basis resulted in net income after giving effect to pro forma adjustments. | |||||||||||||||||||||||||||||||||||||||||||
CALLAWAY GOLF COMPANY | |||||||||||||||||||||||||||||||||||||||||||
Supplemental Financial Information and Non-GAAP Reconciliation | |||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||
GAAP | Non-Cash | Non-Cash | Acquisition | Tax | Non- | GAAP | Non-Cash | Non-Cash | Other Non- | Non- | |||||||||||||||||||||||||||||||||
Net revenues | $ | 2,421,723 | $ | — | $ | — | $ | — | $ | — | $ | 2,421,723 | $ | 1,214,831 | $ | — | $ | — | $ | — | $ | 1,214,831 | |||||||||||||||||||||
Total costs and expenses | 2,162,345 | 17,620 | — | 22,086 | — | 2,122,639 | 1,288,091 | 177,861 | — | 12,526 | 1,097,704 | ||||||||||||||||||||||||||||||||
Income (loss) from operations | 259,378 | (17,620) | — | (22,086) | — | 299,084 | (73,260) | (177,861) | — | (12,526) | 117,127 | ||||||||||||||||||||||||||||||||
Other income/(expense), net | 186,955 | (2,693) | (7,796) | 251,820 | — | (54,376) | (6,518) | — | (3,914) | — | (2,604) | ||||||||||||||||||||||||||||||||
Income tax provision (benefit) | 98,119 | (4,875) | (1,871) | (5,471) | 38,983 | 71,353 | 6,580 | (8,750) | (900) | (2,881) | 19,111 | ||||||||||||||||||||||||||||||||
Net income (loss) | $ | 348,214 | $ | (15,438) | $ | (5,925) | $ | 235,205 | $ | (38,983) | $ | 173,355 | $ | (86,358) | $ | (169,111) | $ | (3,014) | $ | (9,645) | $ | 95,412 | |||||||||||||||||||||
Diluted earnings (loss) per share: | $ | 2.03 | $ | (0.09) | $ | (0.03) | $ | 1.37 | $ | (0.23) | $ | 1.01 | $ | (0.92) | $ | (1.80) | $ | (0.03) | $ | (0.10) | $ | 0.99 | |||||||||||||||||||||
Diluted weighted-average shares outstanding: | 171,194 | 171,194 | 171,194 | 171,194 | 171,194 | 171,194 | 94,207 | 94,207 | 94,207 | 94,207 | 96,055 | ||||||||||||||||||||||||||||||||
(1) Represents non-cash amortization expense of intangible assets in connection with the acquisitions of OGIO, TravisMathew and Jack Wolfskin. 2021 also includes non-cash amortization of Topgolf intangible assets, depreciation expense from the fair value step-up of Topgolf property, plant and equipment and amortization expense related to the fair value adjustments to Topgolf leases and Topgolf debt, all recorded in connection with the Topgolf merger. Additionally, in 2020 there was an impairment charge of $174.3 million related to Jack Wolfskin. | |||||||||||||||||||||||||||||||||||||||||||
(2) Represents the non-cash amortization of the debt discount on the Company's convertible notes issued in May 2020. | |||||||||||||||||||||||||||||||||||||||||||
(3) Acquisition and other non-recurring items in 2021 includes transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021, the recognition of a $252.5 million gain on the Company's pre-merger investment in Topgolf, and expenses related to the implementation of new IT systems for Jack Wolfskin. 2020 includes costs associated with the Company's transition to its new North America Distribution Center, costs associated with the acquisition of Topgolf, implementation costs related to new IT systems for Jack Wolfskin, and severance charges associated with workforce reductions due to the COVID-19 pandemic. | |||||||||||||||||||||||||||||||||||||||||||
(4) As Topgolf's losses exceed Callaway's income in prior years, the Company has recorded a valuation allowance against certain of its deferred tax assets until the Company can demonstrate sustained cumulative earnings. | |||||||||||||||||||||||||||||||||||||||||||
(5) Non-GAAP diluted earnings per share for the nine months ended September 30, 2020 was calculated using the diluted weighted average outstanding shares, as earnings on a non-GAAP basis resulted in net income after giving effect to pro forma adjustments. | |||||||||||||||||||||||||||||||||||||||||||
CALLAWAY GOLF COMPANY | |||||||||||||||||||||||||||||||||||||||
Non-GAAP Reconciliation and Supplemental Financial Information | |||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||||||
2021 Trailing Twelve Month Adjusted EBITDA | 2020 Trailing Twelve Month Adjusted EBITDA | ||||||||||||||||||||||||||||||||||||||
Quarter Ended | Quarter Ended | ||||||||||||||||||||||||||||||||||||||
December 31, | March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | ||||||||||||||||||||||||||||||||
2020 | 2021 | 2021 | 2021 | Total | 2019 | 2020 | 2020 | 2020 | Total | ||||||||||||||||||||||||||||||
Net income (loss) | $ | (40,576) | $ | 272,461 | $ | 91,744 | $ | (15,991) | $ | 307,638 | $ | (29,218) | $ | 28,894 | $ | (167,684) | $ | 52,432 | $ | (115,576) | |||||||||||||||||||
Interest expense, net | 12,927 | 17,457 | 28,876 | 28,730 | 87,990 | 9,049 | 9,115 | 12,163 | 12,727 | 43,054 | |||||||||||||||||||||||||||||
Income tax provision (benefit) | (7,124) | 47,743 | (15,853) | 66,229 | 90,995 | (2,352) | 9,151 | (7,931) | 5,360 | 4,228 | |||||||||||||||||||||||||||||
Depreciation and amortization expense | 10,840 | 20,272 | 43,270 | 44,377 | 118,759 | 9,480 | 8,997 | 9,360 | 10,311 | 38,148 | |||||||||||||||||||||||||||||
JW goodwill and trade name impairment(1) | — | — | — | — | — | — | — | 174,269 | — | 174,269 | |||||||||||||||||||||||||||||
Non-cash stock compensation and stock warrant expense, net | 2,861 | 4,609 | 11,039 | 10,832 | 29,341 | 3,418 | 1,861 | 2,942 | 3,263 | 11,484 | |||||||||||||||||||||||||||||
Non-cash lease amortization expense | (76) | 872 | 2,103 | 2,792 | 5,691 | (120) | 264 | 207 | (99) | 252 | |||||||||||||||||||||||||||||
Acquisitions & other non-recurring costs, before taxes(2) | 8,607 | (235,594) | 3,274 | 1,875 | (221,838) | 4,090 | 1,516 | 5,856 | 4,402 | 15,864 | |||||||||||||||||||||||||||||
Adjusted EBITDA | $ | (12,541) | $ | 127,820 | $ | 164,453 | $ | 138,844 | $ | 418,576 | $ | (5,653) | $ | 59,798 | $ | 29,182 | $ | 88,396 | $ | 171,723 | |||||||||||||||||||
(1) In 2020, amounts include an impairment charge of $174.3 million related to Jack Wolfskin. |
(2) In 2021, amounts include transaction, transition and other non-recurring costs associated with the merger with Topgolf completed on March 8, 2021, the recognition of a $252.5 million gain to step-up the Company's former investment in Topgolf to its fair value in connection with the merger, and expenses related to the implementation of new IT systems for Jack Wolfskin. In 2020, amounts include costs associated with the Company's transition to its new North America Distribution Center, costs associated with the acquisition of Topgolf, and the implementation of new IT systems for Jack Wolfskin, as well as severance related to the Company's cost reduction initiatives. |
CALLAWAY GOLF COMPANY | |||||||||||||||||||
Non-GAAP Reconciliation and Supplemental Financial Information | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
(In thousands) | |||||||||||||||||||
2019 Trailing Twelve Month Adjusted EBITDA | |||||||||||||||||||
Quarter Ended | |||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||||
2019 | 2019 | 2019 | 2019 | Total | |||||||||||||||
Net income (loss) | $ | 48,647 | $ | 28,931 | $ | 31,048 | $ | (29,218) | $ | 79,408 | |||||||||
Interest expense, net | 9,639 | 10,260 | 9,545 | 9,049 | 38,493 | ||||||||||||||
Income tax provision (benefit) | 9,556 | 7,208 | 2,128 | (2,352) | 16,540 | ||||||||||||||
Depreciation and amortization expense | 7,977 | 9,022 | 8,472 | 9,480 | 34,951 | ||||||||||||||
Non-cash stock compensation expense | 3,435 | 3,530 | 2,513 | 3,418 | 12,896 | ||||||||||||||
Non-cash lease amortization expense | (140) | (9) | (36) | (120) | (305) | ||||||||||||||
Acquisitions & other non-recurring costs, before taxes(1) | 13,986 | 6,939 | 3,009 | 4,090 | 28,024 | ||||||||||||||
Adjusted EBITDA | $ | 93,100 | $ | 65,881 | $ | 56,679 | $ | (5,653) | $ | 210,007 | |||||||||
(1) Acquisitions and other non-recurring costs for the year ended December 31, 2019, include (i) $14.1 million of transaction and transition related costs associated with the acquisition of Jack Wolfskin, including banker's fees, legal fees, consulting fees, audit fees for SEC reporting requirements, valuation services associated with preparing Jack Wolfskin's opening balance sheet and travel expenses; (ii) the recognition of a $3.9 million foreign currency exchange loss primarily related to the re-measurement of a foreign currency contract established to mitigate the risk of foreign currency fluctuations on the purchase price of Jack Wolfskin, which was denominated in Euros; and (iii) consulting fees to address an activist investor. These amounts exclude any depreciation or amortization, which has been presented in a separate line above. |
CALLAWAY GOLF COMPANY | |
2021 Adjusted EBITDA Guidance GAAP to Non-GAAP Reconciliation | |
(Unaudited) | |
(In millions) | |
Twelve Months Ended | |
Net income | $271 - $276 |
Adjusted EBITDA(1) | $424 - $430 |
(1) Adjusted EBITDA excludes the following from forecasted net income: Interest expense, taxes, depreciation and amortization expense, non-cash stock compensation expense, non-cash lease amortization expense, transaction and transition costs associated with the merger with Topgolf completed on March 8, 2021, the recognition of a $252.5 million gain to step-up the Company's former investment in Topgolf to its fair value in connection with the merger, and expenses related to the implementation of new IT systems for Jack Wolfskin and Topgolf. A forecast of each of these line items is not available without unreasonable efforts due to the variability of these items and the inability to predict them with certainty. Accordingly, we have not provided a further reconciliation of Adjusted EBITDA to GAAP net income. |
CALLAWAY GOLF COMPANY | |||||
2021 Topgolf Adjusted EBITDA Guidance GAAP to Non-GAAP Reconciliation | |||||
(Unaudited) | |||||
(In millions) | |||||
Twelve Months Ended | |||||
December 31, 2021(1) | |||||
Topgolf segment income from operations(2) | $ | 43 | |||
Topgolf Adjusted EBITDA(3) | $ | 158 | |||
(1) Due to the timing of the Topgolf acquisition on March 8, 2021, Callaway's reported financial results for the twelve months ended December 31, 2021 will only include 10 months of Topgolf results in 2021. |
(2) The Company does not forecast GAAP net income at the subsidiary level, but has provided Topgolf's forecasted segment income from operations as a relevant measurement of profitability. Segment income from operations does not include corporate general and administrative expenses not utilized by management in determining segment profitability, including non-cash amortization, interest expense and taxes as well as other non-cash and non-recurring items. |
(3) Topgolf forecasted Adjusted EBITDA excludes the following from forecasted segment income from operation: depreciation expense, non-cash stock compensation expense and non-cash lease amortization expense. A forecast of each of these line items is not available without unreasonable efforts due to the variability of these items and the inability to predict them with certainty. Accordingly, we have not provided a further reconciliation of Topgolf Adjusted EBITDA to Segment income from operations. |
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SOURCE Callaway Golf Company