Topgolf Callaway 2022 Financials: $4 Billion? Almost …

Topgolf Callaway 2022 Financials – Key Takeaways

2022 total sales hit nearly $3.996 BILLION Five-percent increase over 2021 Topgolf topped the company in revenue Full-year net profit of $158 million

The Topgolf Callaway 2022 financials tell several different stories.

And if you’re a shareholder in Topgolf Callaway, none of them appears to be bad.

Topgolf Callaway Brands topped $3.995 billion in 2022. That’s a 27.5-percent increase over 2021’s record-setting year, despite taking a nearly $150 million hit on foreign currency exchange.

It may be a bit of a surprise but the Topgolf division now is the company’s top income producer. It accounts for nearly 40 percent of all of Callaway’s revenue.

There’s much to discuss, but before we do, we need to issue our standard MyGolfSpy disclaimer. We are not nor do we claim to be financial experts, investment counselors or Wall Street-level business analyst types. We’re golf industry geeks who like to read.

Topgolf Callaway 2022 Financials: $4 BILLION?

As Maxwell Smart would have said, “Missed it by that much.” Actually, looked at slightly differently, Topgolf Callaway would have easily hit the $4-billion mark in sales if the U.S. dollar wasn’t so strong overseas. A strong dollar is great if you’re a tourist. But it devalues sales for U.S. companies that sell a lot of stuff elsewhere in the world. As mentioned, the strong dollar put a nearly $150-million dent in Topgolf Callaway’s top line.

Despite that, all three Topgolf Callaway divisions (Topgolf, Golf Equipment and Active Lifestyle) topped $1 billion in sales.

“2022 was an outstanding year for Topgolf Callaway Brands,” CEO Chip Brewer told investors in a prepared statement last week. “Our performance was driven by a combination of Topgolf’s new venue development and same venue sales growth, very strong consumer reception of our Rogue golf clubs and Chrome Soft golf balls and continued brand momentum in the Active Lifestyle segment.”

For the year, Topgolf sales reached nearly $1.5 billion, up 42.4 percent over 2021. That increase includes 11 new Topgolf venues as well as the fact the Callaway-Topgolf merger didn’t happen until early March of 2021. Golf Equipment sales were up 14 percent globally to $1.4 billion. And Active Lifestyles sales, which include TravisMathew, Jack Wolfskin and OGIO, plus gear and accessories, were up more than 27 percent. The division topped the $1-billion mark for the first time.

How big has Callaway become? Take any one of those business units out of the picture and the company still rivals Acushnet as the biggest company in golf.

Breaking Down the Numbers

Calling Topgolf Callaway a golf company is like calling General Electric a refrigerator company. It’s still a powerhouse in golf equipment but over the past five years it has morphed into a golf lifestyle collection of brands that has become a juggernaut.

As mentioned, the Topgolf Callaway 2022 financials show all three business units each topped $1 billion in sales last year. And each division posted double-digit growth. The picture is even more astounding when taking into account the negative impact of the strong U.S. dollar. In constant currency terms (using last year’s dollar value), Golf Equipment sales jumped nearly 20 percent globally while Active Lifestyle sales increased 36 percent.

Regionally, U.S. sales were nearly $2.8 billion (up 35 percent) while European sales topped $537 million (up 22 percent in constant currency). Sales in Asia topped $545 million ((up 32 percent in constant currency) while the company’s Rest of World division hit $115 million in sales. That’s an 18.5-percent increase in constant currency.

Drilling down into each segment, Callaway golf club sales hit nearly $1.1 billion globally (up 16 percent in constant currency) while golf ball sales exceeded $309 million. That’s a 36-percent constant currency increase and good for a 21-percent golf ball market share in the U.S.

Apparel sales were up more than 35 percent in constant currency at just under $632 million. Gear, accessories and other (think gloves, hats, bags and other Callaway-branded doo-dads) topped $408 million. That’s a 34-percent increase in constant currency.

According to Callaway, those jumps are due to volume increases as well as price increases.

The Topgolf Part

It’s no secret the Topgolf merger/acquisition has put Topgolf Callaway into a different stratosphere. Direct revenue of $1.477 billion, plus another $72 million in ancillary advertising income, will do that for you.

As mentioned, Topgolf now is the biggest revenue segment in the company. It accounts for 39 percent of Topgolf Callaway sales. Golf Equipment comes in at 35 percent.

Overall, Topgolf Callaway is reporting $158 million in net profit for the year. That’s down considerably from 2021’s profit of $322 million. Most of that posted profit, however, wasn’t cash. The Topgolf merger represented a $252-million non-cash gain. Without that gain, Callaway’s profits were nearly $138 million in 2021.

Oddly, Topgolf profit was only $77 million on more than $1.5 billion in sales. That seems a bit out of whack but it makes sense after factoring in indirect expenses. There’s $125 million in depreciation and amortization, $280 million in venue capital expenditures and $941 million in venue financing liability expenses. A better indicator of Topgolf’s performance is its contribution to adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) which was $235 million.

Eleven Topgolf venues opened in 2022 which, combined with growth in same-venue sales and a full 12 months in the corporate umbrella (compared to only 10 in 2021), sparked a 42-percent growth in revenue. Topgolf Callaway fully expects that growth to continue in 2023 with revenue projected to hit $1.9 billion.

Topgolf Callaway does expect Golf Equipment to be flat in 2023 and Active Lifestyle to grow in the low teens percentage-wise. Overall, 2023 revenue is projected to hit $4.4 billion with EBITDA projected to hit $620 to $640 million with half coming directly from Topgolf.

Topgolf Callaway Financials: Spicy Tidbits

It’s the odds and ends that make financial reports fascinating. For instance, it’s impossible to glean from these reports just how much of a golf club’s cost is tied to marketing and player sponsorship. The best we can see is Cost of Goods Sold but that includes soft goods as well as hard goods. We can also look at Selling, General and Administrative Expenses, which includes Marketing. But it also includes virtually all overhead, including salaries and commissions for everyone from the CEO to the maintenance team.

For what it’s worth, that expense was approximately $970 million in 2022. R&D is a separate line item for Topgolf Callaway. That expense topped $76 million or roughly three percent of product sales.

In its investor presentation, Topgolf Callaway shared some startling stats from the National Golf Foundation. In 2022, for the first time ever, off-course golf participation exceeded on-course participation. Of the estimated 41.1 million golf participants, 15.5 million were off-course only while 13.2 million were on-course only. Another 12.4 million did both.

Demographically, the off-course-only participants trend younger, with an average age of 31, and more diverse. Forty-one percent are female and 40 percent identify as non-white. Forty percent report an average annual income in excess of $100,000 while 54 percent say they’re financially “comfortable.”

On-course-only golfers trend older (46), whiter (78 percent) and male (72 percent). They’re also more affluent: 42 percent make over $100,000 and 54 percent say they’re financially comfortable.

Those who do both have an average age of 42. Twenty-three percent are female and 22 percent are non-white. They’re more affluent, with 52 percent earning more than $100,000 and 55 percent identifying as financially comfortable.

The Topgolf Effect?

Topgolf is perfect for the non-golfer to take a few whacks, enjoy a few drinks and have a few laughs. So the idea that off-course-only golf is bigger than on-course-only golf probably shouldn’t be a surprise. But what may surprise you is that Topgolf has become a legitimate golf “feeder” system.

According to the National Golf Foundation, 10 percent of current green-grass golfers credit Topgolf for introducing them to the game and getting them out on the course.

“For every 11 new Topgolf venues we deliver annually, we expect to add approximately three to four million unique visitors,” Brewer told investors last week. “With our venue development, we see a clear path to structural growth for the modern golf ecosystem, an attractive market in which Topgolf Callaway Brands is uniquely positioned to lead.”

The company is planning to open 11 more Topgolf venues this year. Recently opened venues include actual club fitting centers which create direct-to-consumer sales opportunities. Those sales will be at full retail pricing as it would be foolish for Topgolf Callaway to undercut its retail partners. Any sales through those venues, however, will be at the highest margins possible.

Callaway clearly put Acushnet in its rearview mirror when it merged with Topgolf. Acushnet’s 2022 financials should be out by the end of February but, by all accounts, it should experience another banner year. And last week’s Club Glove deal shows Acushnet is in full growth through acquisition mode.  It is interesting to note that if you took Topgolf out of the equation, the two companies would be neck and neck for golf supremacy. And TaylorMade, while privately owned, isn’t far behind.

But you can’t take Topgolf out of the equation and that puts Topgolf Callaway in a unique and unchallenged position as the game’s top dog.

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