Callaway Golf (NYSE: ELY) was both surprised and delighted by the performance of its newest investment, Topgolf, earlier in the year. CEO Chip Brewer describes the merging of its traditional golf businesses and the entertainment business as “Modern Golf,” capturing the imaginations of on- and off-course golfers alike.
It has not been quite a year since Callaway purchased all of Topgolf outstanding shares. In the recent third quarter, the entertainment venue returned to 100% of 2019 pre-pandemic revenues — a feat sooner than expected, especially with corporate entertaining not yet returning to normalcy, but with walk-in traffic and social entertaining ramping up.
Callaway’s apparel, equipment and Topgolf business continued to enjoy a surge as year-end revenue guidance ranged from $3,110 million to $3,120 million. That improved overall year-end estimates of just over $3 billion.
Highlights from Tuesday’s Q3 report:
- 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
- Club sales were up 9.5% YOY and 36.5% compared to 2019 third quarter — even with supply chain disruptions
- Ball sales increased 4.1% during the quarter and 42% compared to third quarter 2019 increasing brand market share
- Sales of apparel — including Jack Wolfskin, Travis Mathew and Callaway brands — were up 19.6% YOY
- Topgolf contributed $334M in revenue and $24M in segment operating income in third quarter
- Topgolf revenue, driven by strong walk-in traffic and social events business, delivered higher than expected profitability due to lower labor operating costs via reduced staffing levels and a tight labor pool
- Unexpected profitability and higher than expected cash-on-hand allowed Callaway to make a $30M investment in Five Iron Golf this month, a simulator golf company with 10 locations and 10 more on the way
Looking ahead, Brewer said the company will not yet give guidance on 2022 estimates although they are very optimistic the positive trends in golf will continue. Brewer justified his optimism by pointing to the fact sales have yet to slow, retail partners are forecasting 2022 at extremely healthy levels and inventories in the market are at historical lows.
