TOPGOLF CALLAWAY BRANDS ANNOUNCES SECOND QUARTER 2023 RESULTS

HIGHLIGHTS 

• Company delivered strong Q2 results consistent with expectations and reaffirms full year 2023 revenue and Adjusted EBITDA guidance
• Topgolf delivered same venue sales growth within the guidance range, marking the seventh consecutive quarter of growth
• Topgolf opened 2 new venues in the U.S. and remains on plan to open 11 venues in 2023
• Golf Equipment performed well in the quarter with strong market share gains
• Both total Company and Topgolf remain on track to be free cash flow positive in 2023

CARLSBAD, Calif., Aug. 8, 2023 /PRNewswire/ -- Topgolf Callaway Brands Corp. (the "Company" or "Topgolf Callaway Brands") (NYSE:MODG) announced its financial results for the second quarter ended June 30, 2023.

"Our solid second quarter results were driven by strong performance across all business segments, and I am particularly pleased with market share gains in Golf Equipment and the continued strength of Topgolf's venue business," commented Chip Brewer, President and Chief Executive Officer of Topgolf Callaway Brands. "Excitement around the game of golf remains strong with positive rounds played, strength in consumables, particularly golf balls, and an engaged Modern Golf consumer. Looking ahead, we believe that our unique and attractive portfolio of leading brands continues to be very well-positioned to benefit from the sustained momentum in both off-course and on-course golf. We continue to track ahead of our long-term performance targets for the business and remain confident in delivering positive free cash flow for Topgolf and the total Company in 2023."

CONSOLIDATED RESULTS

The Company announced the following GAAP and non-GAAP financial results for the three and six months ended June 30, 2023 and 2022:

NON-GAAP RESULTS

Non-GAAP results exclude certain non-recurring and non-cash adjustments as defined in the Additional Information and Disclosures section of this release. The Company has also provided a reconciliation of the non-GAAP information to the most directly comparable GAAP information in the tables to this release.

SECOND QUARTER 2023 CONSOLIDATED RESULTS COMMENTARY

(All comparisons to prior periods are calculated on a year-over-year basis, unless otherwise noted)

The Company reported solid financial results for the second quarter. Net revenues grew 5.7%, or 6.5% on a constant currency basis, driven by strong 16.6% growth at Topgolf, including approximately 1% same venue sales growth. The Company achieved this result despite an $8.0 million negative impact from changes in foreign currency rates.

Income from operations decreased 10.1%. On a non-GAAP basis income from operations decreased 3.4% and was flat on a constant currency basis.

Net income increased $12.0 million on a GAAP basis, or decreased $15.7 million to $77.8 million on a non-GAAP basis. This non-GAAP performance includes a $20.3 million increase in interest expense related to higher interest rates and additional term loan debt.

Adjusted EBITDA of $206.2 million slightly exceeded the high end of the Company's guidance range, as compared to $207.3 million in the second quarter of 2022. This year-over-year performance was due to unfavorable changes in foreign currency rates, and partially offset by operational efficiencies. On a constant currency basis, Adjusted EBITDA increased by 1.7%.

SEGMENT RESULTS

SEGMENT NET REVENUES

The table below provides net revenues by segment for the three and six months ended June 30, 2023 and 2022:

SEGMENT OPERATING INCOME

The table below provides the breakout of segment operating income for the three and six months ended June 30, 2023 and 2022:

SECOND QUARTER 2023 SEGMENT COMMENTARY

(All comparisons to prior periods are calculated on a year-over-year basis, unless otherwise noted)

• Topgolf
  
  
  
  
• Segment revenue increased $67.1 million or 16.6%, to $470.8 million, reflecting the brand's on-going momentum with the Modern Golf consumer. This result was driven by new venues and same venue sales growth of approximately 1%, which was within the guidance range, and on a two-year stack basis, as defined below, same venue sales growth was approximately 9%.
  
  
  
  
• Segment operating income decreased $0.2 million to $44.0 million due to planned investments in marketing and labor and were partially offset by increased efficiencies in the venues.
  
  
  
  
• Segment Adjusted EBITDA increased $5.8 million (or 6.7%) to $92.1 million due to the increase in revenues and improved operational efficiencies at the venues.
  
  
  
  
• Golf Equipment
  
  
  
  
• Segment revenue decreased $0.9 million or 0.2% (1.0% increase on a constant currency basis) to $451.0 million, due to a negative foreign currency impact of $5.5 million and an inventory fill-in at retail in Q2 2022 that did not recur in Q2 2023. These headwinds were largely offset by an increase in golf ball sales due to improved supply and strong demand.
  
  
  
  
• Segment operating income decreased $3.9 million (or 3.9%) primarily due to planned operational expenditures to support the business and was partially offset by an increase in gross margins related to lower freight and increased pricing.
  
  
  
  
• Active Lifestyle
  
  
  
  
• Segment revenue decreased $2.2 million or 0.8% (flat on a constant currency basis) to $257.9 million, primarily due to the year-over-year difference of wholesale shipment timing in Europe in the first half of the year and was largely offset by continued strong growth at TravisMathew. Segment revenue for the first half of 2023 grew 13.3%.
  
  
  
  
• Segment operating income decreased $3.0 million (or 13.3%) due to planned operating expenditures to support business growth and was partially offset by gross margin increases related to increases in price and a higher mix of direct-to-consumer business.

The following is a reconciliation of total segment operating income to income before income taxes for the three and six months ended June 30, 2023 and 2022:

2023 BUSINESS OUTLOOK

The 2023 projections set forth below are based on the Company's best estimates at this time.

 

ADDITIONAL INFORMATION AND DISCLOSURES

Conference Call and Webcast

The Company will be holding a conference call at 2:00 p.m. Pacific time today, August 8, 2023, to discuss the Company's financial results, outlook and business. The call will be webcast live on our investor relations website at https://www.topgolfcallawaybrands.com/news-and-events/presentations. A replay of the conference call will be available approximately two hours after the call ends. The replay may be accessed through the Investor Relations section of the Company's website at https://www.topgolfcallawaybrands.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 of America ("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" or as "constant currency" results. This information estimates the impact of changes in foreign currency exchange 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 and depreciation of acquired intangible assets and purchase accounting adjustments. For 2023, non-recurring items include legal costs and credit agency fees relating to, and debt modification costs in connection with, the 2023 debt refinancing, IT integration and implementation costs stemming from acquisitions, restructuring and reorganization charges, and the release of tax valuation allowances. For 2022, non-recurring items include legal costs and credit agency fees related to a postponed debt refinancing, IT integration and implementation costs associated with new ERP systems stemming from acquisitions and non-cash asset write-downs.

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.

For forward-looking Adjusted EBITDA, non-GAAP diluted earnings per share, free cash flow, and Topgolf Adjusted EBITDA (together, the "Projected Non-GAAP Measures") information provided in this release, reconciliation of such Projected Non-GAAP Measures to the most closely comparable GAAP financial measures is not provided because the Company is unable to provide such reconciliation without unreasonable efforts. The inability to provide a reconciliation is because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact net income in the future but would not impact the Projected Non-GAAP measures. These items may include certain non-cash depreciation, which will fluctuate based on the Company's level of capital expenditures, non-cash amortization of intangibles related to the Company's acquisitions, income taxes, which can fluctuate based on changes in the other items noted and/or future forecasts, and other non-recurring costs and non-cash adjustments. Historically, the Company has excluded these items from the Projected Non-GAAP Measures. The Company currently expects to continue to exclude these items in future disclosures of the Projected Non-GAAP Measures and may also exclude other items that may arise. The events that typically lead to the recognition of such adjustments are inherently unpredictable as to if or when they may occur, and therefore actual results may differ materially. This unavailable information could have a significant impact on net income.

Definitions

Free cash flow.  The Company defines free cash flow as cash flows from operating activities, less capital expenditures net of proceeds from lease financing and net of proceeds from government grants.

Same venue sales. The Company 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 in the year of comparison.

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 its segments') third quarter and full year 2023 guidance (including net revenues, Adjusted EBITDA, Topgolf Adjusted EBITDA, free cash flow, and Topgolf venue profitability), performance against long-term financial targets, 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, consumer trends and behavior, future industry and market conditions, foreign currency effects and their impacts, 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," "would," "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 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; 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. 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, 2022 as well as other risks and uncertainties detailed from time to time in the Company's reports on Forms 10-K, 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 Topgolf Callaway Brands

Topgolf Callaway Brands Corp. (NYSE:MODG) is an unrivaled tech-enabled Modern Golf and active lifestyle company delivering leading golf equipment, apparel, and entertainment, with a portfolio of global brands including Topgolf, Callaway Golf, TravisMathew, Toptracer, Odyssey, OGIO, Jack Wolfskin, and World Golf Tour ("WGT"). "Modern Golf" is the dynamic and inclusive ecosystem that includes both on-course and off-course golf. For more information, please visit https://www.topgolfcallawaybrands.com.

Investor Contact

Katina Metzidakis

(760) 931-1771

[email protected] 

 

 

 

 

 

 

 

 

 

 

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SOURCE Topgolf Callaway Brands Corp.