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Topgolf Callaway and Acushnet Q3 Financial Reports
The dust is settling in the wake of the Topgolf Callaway and Acushnet Q3 financial reports. And it appears we live in a world where one company’s tally of over $1 billion in quarterly sales and nearly $30 million in quarterly profit can cause its stock price to tailspin.
And in this same world, that company’s chief rival can post “only” $593 million in sales but more than $57 million in profit and Wall Street barely cracks a smile.
Welcome, friends, to the high-stakes world of publicly traded golf companies.
The news of the past week raises a multi-billion-dollar question: What do you do when the cash cow you “merged with” to equipment-proof your company delivers less-than-expected results for two straight quarters?
For Topgolf Callaway, the answer may lie in “venue efficiencies.” If you’re Acushnet, you keep your head down and be glad it isn’t you.
We’re going to dive into the Q3 financial reports for both companies but, first, we must deliver our standard disclaimer:
We are not, nor do we claim to be, financial experts, investment counselors or Wall Street-type business analysts. We’re simply golf industry geeks who like to read.
Now let’s look at the books.
Topgolf Callaway Q3 Financials
As has been the company’s trend of late, the very top of the Topgolf Callaway Q3 financials press release is downright understated. Instead of leading with big sales and profit numbers, the very first bullet point reads as follows:
“Topgolf continues to drive efficiencies and delivered strong venue-level margins.”
Sexy, right?
The next bullet point is even better:
“On-course participation remains strong – Callaway maintains the number-one market share in woods, drivers, fairway woods, hybrids and irons.”
That’s followed by the news that TravisMathew and Jack Wolfskin delivered solid growth for the quarter and that both the total company and Topgolf remain on track to be cash-flow positive in 2023.
“Both Golf Equipment and Active Lifestyle had strong quarters,” said CEO Chip Brewer in a statement. “Topgolf, despite same venue sales that were lower than expected, was able to expand venue margins.”
Wait. What?
“With current same venue sales trends and foreign exchange rates, we are lowering our forward guidance and taking decisive action to lower both costs as well as capital expenditures and to drive additional synergies across our business.”
Take all the pretty words out and what investors heard was “lower than expected” and “lowering our forward guidance.”
What Does That Mean?
There are lots of numbers in any quarterly financial report. For Q3, Topgolf Callaway reported $1.4 billion in sales which is up 5.3 percent over Q3 of last year. That growth was paced by the Topgolf and Active Lifestyle business units.
Additionally, income from operations was up 8.2 percent but net income was down 23 percent to $29.7 million compared to Q3 last year. Topgolf Callaway cites higher interest expenses due to higher rates, additional loan debt and increased venue financing interest which cost the company an additional $17 million.
Within hours after announcing the results, Topgolf Callaway stock prices began to drop. The price plummeted 18 percent Wednesday night in after-hours trading and fell even further yesterday. In fact, Topgolf Callaway stock is down 37 percent year to date. As of this writing, the price stands at $10.35 per share. It was $25.44 this past January.
So why the big drop? It goes back to “lower-than-expected same-venue sales,” and “lowering our forward guidance.”
Topgolf Callaway had been expecting mid to high single-digit growth in same-venue Topgolf sales, a key indicator of how a single venue is doing year over year. In reality, same-venue sales actually dropped three percent.
For the quarter, Topgolf revenues were actually up eight percent at $430.5 million. That increase, however, is due exclusively to the seven new Topgolf venues that opened this year, four of them in Q3 alone.
If that got investors skittish, the next bit of news gave them the heebie-jeebies.
Downward Forecasting
Publicly traded companies traditionally provide investors with forward guidance, management’s best estimate as to how the company will end the year. On Wednesday, Topgolf Callaway told investors it doesn’t expect to meet its previous revenue or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) projections.
As recently as the end of Q2, Topgolf Callaway expected to hit $4.420 billion to $4.470 billion for the year. That projection has been lowered to $4.235 billion to $4.260 billion. That may not sound like much but it’s missing the mark by some $200 million.
EBITDA is used to demonstrate a company’s sales and operations performance before all the finance stuff comes into play. Topgolf Callaway adjusted its year-end EBITDA downward from $315 million to $325 million to $280 million to $290 million.
In its presentation to investors, Topgolf Callaway put its best foot forward. The company showed it’s still Numero Uno in golf club market share at roughly 25 percent and a solid second in golf ball market share at approximately 20 percent. Additionally, it told investors it’s spending $50 million on golf equipment R&D and is ranked No. 1 in innovation and advanced technology in Golf Datatech’s recent Golf Product Attitude Study.
Just In Case You’re Interested …
All that, of course, is the big story. The quarterly and year-to-date numbers, of course, are fascinating as well.
As mentioned, Q3 sales topped $1.04 billion while YTD sales stand at $3.39 billion, up eight percent over last year. YTD profit is $172 million, down 25 percent from last year.
For the quarter, Topgolf sales were nearly $448 million and YTD stands at $1.33 billion, up 16 percent from last year.
Golf Equipment sales for Q3 were $293 million, down slightly from last year. Golf Equipment sales stand at $1.19 billion for the year which is basically flat from 2022. Of that, club sales reached $222.2 million for the quarter and $913 million for the year. Ball sales reached $71 million for the quarter (down 5.4 percent) and $275 million year to date which is up seven percent.
The Active Lifestyle category – apparel, gear and accessories – was up six percent for the quarter at $299 million. It stands at $877.6 million for the year, a 12.4-percent jump over 2022.
Additionally, Topgolf Callaway recently announced plans to buy BigShots Golf for $29 million. BigShots is a mini-Topgolf operation owned by Invited, nee ClubCorp. The deal lands Topgolf Callaway the lone owned-and-operated BigShots venue adjacent to the Invited-owned Firestone Country Club in Akron, Ohio. It also became the license holder for three other franchised BigShots venues in the U.S.
Additionally, and perhaps more importantly, Topgolf Callaway will also become a preferred golf equipment and apparel vendor for all 140 Invited-owned golf and country clubs in the U.S.
Now, About Acushnet …
Oh, yeah, those guys.
If nothing else, Acushnet’s approach to its quarterly financials hasn’t changed. Like the company itself, the financials are straightforward with nothing but the facts. Sure, it also puts its best foot forward for investors but the company just keeps chugging forward.
Specifically, Acushnet’s Q3 sales topped $593 million, a 6.3-percent increase over 2022. Year-to-date sales stand at $1.969 billion, an eight-percent increase over 2022.
Acushnet chugs along with profits as well: $57.3 million in Q3 (up 10.6 percent) and $225 million year to date (up 13 percent). More importantly, Acushnet says it’s going to hit its projections.
“Considering our third-quarter results and expectations for the fourth quarter,” says Acushnet CEO David Maher, “we are reaffirming our full-year revenue outlook and narrowing our Adjusted EBITDA outlook toward the high end. This reflects continued strong demand for Acushnet’s products, underlying enthusiasm for the game of golf and healthy fundamentals across the golf industry.”
Kind of a different vibe, don’t you think?
Acushnet Q3 Financial Report – Specifics
Titleist golf club sales paced Acushnet’s Q3 growth. Fueled by the new T-Series irons, club sales topped $181 million in Q3, up nearly 18 percent. Golf ball sales in Q3 were more modest, coming in at $192.6 million, a 6.3-percent increase. Acushnet asserts, however, that the increase is primarily due to higher selling prices of the new Pro V1 line compared to the lower-priced 2021 models that were sold last year.
Titleist gear (hats, bags, gloves, etc.) was down 20 percent for the quarter. Last year’s Q3 sales were skewed due to fulfillment of supply chain-related backorders. FootJoy sales were up slightly at $137 million.
Year-to-date ball sales show just how dominant Titleist remains. Sales for the first nine months topped $622 million (up 14 percent) while Callaway is a distance second with YTD ball sales of $275 million (a seven-percent increase). Titleist club sales stand at nearly $550 million for the year (up 15 percent) compared to Callaway’s dominance at $913 million which is actually down five percent.
FootJoy’s business is basically flat at $500 million compared to last year when foreign currency exchange rates are taken into account while Titleist gear sales are up seven percent YTD at nearly $185 million.
The U.S. remains Acushnet’s biggest market by far with YTD sales topping $1.12 billion.
For the year, Acushnet is projecting total sales of $2.3 billion to $2.4 billion. Its EBITDA projections are $365 million to $375 million. It’s notable to compare Acushnet’s $365-$375 million EBITDA on $2.3-$2.4 billion in sales compared to Callaway’s projected $280-$290 million in EBITDA on more than $4.2 billion in sales.
Topgolf Callaway and Acushnet Q3 Financial Reports: Final Thoughts
What does all this mean to those of us who play golf for fun? Not a ton, really. Despite plummeting stock prices, Topgolf Callaway isn’t going anywhere. And, no, none of this has anything to do with what the company pays Jon Rahm to play its clubs or wear its hats. And, no, none of this means we’re going to see $900 drivers anytime soon, either.
We heard rumors of Topgolf-related layoffs at Callaway earlier this year which is probably what the company meant when it cited “venue efficiencies” as part of its plans going forward. As mentioned, seven new Topgolf venues have opened this year with four coming in just the past two months. Four more venues are slated to open by the end of the year.
The company did cite a drop-off in corporate events as a key reason for missing same-venue growth expectations. Apparently, Topgolf was a favorite venue for post-COVID corporate events last year but that business has slowed. It will be interesting to see how Topgolf sparks same-venue growth going forward.
As for Acushnet, the takeaways are no different from last quarter (and the quarter before that and the quarter before that). Acushnet is a golf company, an on-course golf company that’s well-managed and plays to its strengths.
In fact, if you take away everything but golf clubs and golf balls, Acushnet and Topgolf Callaway sales are virtually identical.
The post Topgolf Callaway and Acushnet Q3 Financial Reports appeared first on MyGolfSpy.
