Callaway Golf Company Announces Record Financial Results For Third Quarter 2021 And Increases Full Year 2021 Guidance

November 9, 2021 at 4:23 PM EST
High-Demand for Golf Equipment and Apparel Continues
Topgolf Revenue Driven by Strong Walk-in Traffic and Social Events Business
- Q3 2021 consolidated net revenue increased $381 million (+80%) to $856 million
- Q3 2021 GAAP net loss of $(16) million and non-GAAP net income of $26 million
- Q3 2021 Adjusted EBITDA increased $51 million (+57%) to $139 million
- Increased full year 2021 revenue guidance to $3,110 to $3,120 million and Adjusted EBITDA guidance to $424 to $430 million as golf equipment and apparel revenue and Topgolf venue profitability continue to outperform prior expectations

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
2021

Q3
2020

Change


 YTD
2021

 YTD
2020

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
2021

Q3
2020

Change


YTD
2021

YTD
2020

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
2021

Q3
2020

Change


YTD
2021

YTD
2020

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
Estimate

Previous 2021
Estimate

2020
Results

2019
Results

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
invrelations@callawaygolf.com

CALLAWAY GOLF COMPANY

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(In thousands)



September 30,
2021


December 31,
2020

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
September 30,


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
September 30,


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
September 30,


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
September 30,


Growth


Non-GAAP
Constant
Currency
vs. 2020(1)



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
September 30,


Growth


Non-GAAP
Constant
Currency
vs. 2020(1)



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
September 30,


Growth


Non-GAAP
Constant
Currency
vs. 2020(1)



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
September 30,


Growth


Non-GAAP
Constant
Currency
vs. 2020(1)



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
September 30,


Growth


Non-GAAP
Constant
Currency
vs. 2020(1)



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
September 30,


Growth


Non-GAAP
Constant
Currency
vs. 2020(1)



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
September 30,


Growth


Nine Months Ended
September 30,


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
Amortization
and
Depreciation(1)


Non-Cash
Amortization
of Discount
on
Convertible
Notes(2)


Acquisition
& Other
Non-
Recurring
Items(3)


Tax
Valuation
Allowance(4)


Non-
GAAP(5)


GAAP


Non-Cash 
Amortization(1)


Non-Cash
Amortization
of Discount
on
Convertible
Notes(2)


Other Non-
Recurring
Items(3)


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
Amortization
and
Depreciation(1)


Non-Cash
Amortization
of Discount
on
Convertible
Notes(2)


Acquisition
& Other Non-
Recurring
Items(3)


Tax
Valuation
Allowance(4)


Non-
GAAP


GAAP


Non-Cash 
Amortization
and
Impairment Charges(1)


Non-Cash
Amortization
of Discount
on
Convertible
Notes(2)


Other Non-
Recurring
Items(3)


Non-
GAAP(5)

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:

$