CARLSBAD, Calif., May 10, 2021 /PRNewswire/ -- Callaway Golf
Company (the "Company" or "Callaway") (NYSE:ELY) announced today
its financial results for the first quarter ended March 31, 2021.
"We are very pleased with our first quarter financial results,
with revenues increasing 47% and Adjusted EBITDA increasing 113% in
the first quarter of 2021 compared to the same period in 2020,"
commented Chip Brewer, President and
Chief Executive Officer of the Company. "Our golf equipment
business is continuing to experience unprecedented demand while our
soft goods business and Topgolf business are recovering from the
pandemic faster than anticipated. We believe our three operating
segments are well positioned for both the current environment and
our expectations over the next several years."
"Although the COVID-19 pandemic continues, especially in
international markets, we are pleased with the current state and
trends of our business," continued Mr. Brewer. "The Topgolf merger
is off to a strong start; each of our businesses is performing
ahead of plan; and our available liquidity, comprised of
cash-on-hand and availability under our credit facilities, is at an
all-time high of $713 million at
March 31, 2021 compared to
$260 million for the same date in
2020. As a result, we now project that full year 2021 revenue and
Adjusted EBITDA levels will exceed 2019 levels for the legacy
Callaway business and will meet or exceed the full twelve-month
2019 levels for the Topgolf business."
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 purpose of this non-GAAP presentation is to provide additional
information to investors regarding the underlying performance of
the Company's business without certain non-cash amortization of
intangibles and other assets related to the Company's acquisitions,
non-recurring transaction and transition costs related to
acquisitions, and other non-recurring costs, including costs
related to the merger and integration with Topgolf International,
Inc. ("Topgolf"), transition to the Company's new North American
Distribution Center, implementation of a new IT system for Jack
Wolfskin, the $39 million non-cash
valuation allowance recorded against certain of the Company's
deferred tax assets as a result of the merger, the $253 million non-cash gain as the result of the
Company's prior equity position in Topgolf, as well as non-cash
amortization of the debt discount related to the Company's
convertible notes. The Company also provided revenue information on
a constant currency basis and information regarding its earnings
before interest, taxes, depreciation and amortization expenses,
non-cash stock compensation expense, non-cash lease amortization
expense, and the non-recurring and non-cash items previously
mentioned ("Adjusted EBITDA"). 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 First Quarter 2021 Financial Results
The Company announced the following GAAP and non-GAAP financial
results for the first quarter of 2021 (in millions, except
EPS):
GAAP
RESULTS
|
|
NON-GAAP
PRESENTATION
|
|
Q1
2021
|
Q1
2020
|
Change
|
|
Q1
2021
Non-GAAP
|
Q1 2020
Non-GAAP
|
Change
|
Net
Revenue
|
$652
|
$442
|
$210
|
|
$652
|
$442
|
$210
|
Income from
Operations
|
$76
|
$41
|
$35
|
|
$97
|
$43
|
$54
|
Other
Income/(Expense), net
|
$244
|
($3)
|
$247
|
|
($5)
|
($3)
|
($2)
|
Income before income
taxes
|
$320
|
$38
|
$282
|
|
$91
|
$41
|
$50
|
Net Income
|
$272
|
$29
|
$243
|
|
$77
|
$31
|
$46
|
Earnings Per
Share
|
$2.19
|
$0.30
|
$1.89
|
|
$0.62
|
$0.32
|
$0.30
|
|
Q1
2021
|
Q1
2020
|
Change
|
Adjusted
EBITDA
|
$128
|
$60
|
$68
|
For the first quarter of 2021, the Company's net revenue
increased $210 million (47%) to
$652 million, a new first quarter
record for the Company, compared to $442
million for the same period in 2020. This increase was
driven by the strength of the legacy Callaway business, which
increased 26% compared to the first quarter of 2020, as well as
$93 million related to the addition
of four weeks of the Topgolf business, which was acquired on
March 8, 2021. Changes in
foreign currency rates had a $17
million positive impact on first quarter 2021 net
revenue.
For the first quarter of 2021, the Company's income from
operations was $76 million, an
increase of $35 million (85%)
compared to $41 million in the first
quarter of 2020. Non-GAAP income from operations was
$97 million, a $54 million (126%) increase compared to
$43 million for the first quarter of
2020. The increase in income from operations was led by a
$50 million increase in income from
operations from the legacy Callaway business as well as an
incremental $4 million from the
addition of four weeks of the Topgolf business.
For the first quarter of 2021, the Company's other
income/(expense), net was $244
million, including a non-cash gain of $253 million related to the write-up of the
Company's pre-merger investment in Topgolf, compared to net expense
of $3 million in the first quarter of
2020. The Company's non-GAAP other income/(expense), net, which
excludes, among other things, the Topgolf gain, was $5 million of expense in the first quarter of
2021 compared to other expense of $3
million in the first quarter of 2020.
First quarter 2021 fully diluted earnings per share was
$2.19, including $2.04 from the non-cash Topgolf gain, compared to
fully diluted earnings per share of $0.30 for the first quarter of 2020. Non-GAAP
first quarter 2021 fully diluted earnings per share was
$0.62, compared to $0.32 for the first quarter of 2020. Fully
diluted shares were 125 million shares of common stock in the first
quarter of 2021, an increase of 29 million shares compared to 96
million shares in the first quarter of 2020. The increased share
count is primarily related to the issuance of additional shares in
connection with the Topgolf merger.
For the first quarter of 2021, the Company's Adjusted EBITDA was
$128 million, an increase of
$68 million (113%) compared to the
first quarter of 2020. The increase was driven by a
$53 million increase in the legacy
Callaway business and $15 million
from four weeks of the Topgolf business.
SEGMENT RESULTS
As a result of the Topgolf merger, the Company now has three
operating segments, namely Golf Equipment; Apparel, Gear and Other;
and Topgolf. The Company evaluates the performance of its
operating segments based on segment operating income. Management
uses total segment operating income as a measure of its operational
performance, excluding corporate overhead and certain non-recurring
and non-cash charges. The Company believes that information about
total segment operating income allows investors to better evaluate
operating results and changes in results without these
non-operational factors.
The following is a reconciliation of income before income taxes
to total segment operating income (in millions):
|
Q1 2021
|
Q1 2020
|
Change
|
Total segment
operating income
|
$109
|
$55
|
$54
|
Reconciling
items*
|
($33)
|
($14)
|
($19)
|
Income from
Operations
|
$76
|
$41
|
$35
|
Gain on Topgolf
Merger
|
$253
|
-
|
$253
|
Interest
Expense
|
($18)
|
($9)
|
($9)
|
Other
Income
|
$9
|
$6
|
$3
|
Income before income
taxes
|
$320
|
$38
|
$282
|
*Reconciling items
exclude corporate overhead and certain non-recuring and non-cash
items as described in the schedules to this release.
|
The table below provides the breakout of segment revenues and
segment operating income:
Segment Net
Revenue
|
Q1
2021
|
Q1
2020
|
Change
|
Golf
Equipment
|
$377
|
$292
|
$85
|
Apparel, Gear &
Other
|
$182
|
$151
|
$31
|
Topgolf
|
$93
|
-
|
$93
|
Total Segment Net
Revenue
|
$652
|
$442
|
$210
|
|
|
Total Segment
Operating Income
|
Q1
2021
|
Q1
2020
|
Change
|
Golf
Equipment
% of segment
revenue
|
$85
22.5%
|
$59
20.2%
|
$26
230 bps
|
Apparel, Gear &
Other
% of segment
revenue
|
$20
11.0%
|
($4)
(2.6%)
|
$24
1,360 bps
|
Topgolf
% of segment
revenue
|
$4
4.3%
|
-
-
|
$4
-
|
Total segment
operating income % of total net
revenue
|
$109
16.7%
|
$55
12.4%
|
$54
430 bps
|
Golf Equipment. The golf equipment segment's net revenue
increased $85 million (29%) to
$377 million in the first quarter of
2021 compared to $292 million in the
first quarter of 2020. The increase was driven by the continued
surge in golf demand and participation, our supply chain team's
ability to secure a greater than expected supply of golf equipment
components during the first quarter of 2021, as well as the
negative impacts of COVID-19 shutdowns across portions of the
Company's business in the first quarter of 2020. Both the golf club
and golf ball products saw significant growth year over year, with
golf club sales increasing 26% and golf ball sales increasing 50%.
Segment operating income for the golf equipment segment increased
$26 million (44%) to $85 million in the first quarter of 2021 compared
to $59 million in the first quarter
of 2020. The increase was driven by the increased revenue,
operating expense leverage and favorable foreign currency exchange
rates, partially offset by increased freight cost and product mix,
including lower margins on our higher technology golf club product
offering and packaged sets.
Apparel, Gear and Other. The apparel, gear and other
segment's net revenue increased $31
million (21%) to $182 million
in the first quarter of 2021 compared to $151 million in the first quarter of 2020. The
increase was driven by a 23% increase in apparel sales as well as
an 18% increase in gear, accessories and other. Both the
TravisMathew and Jack Wolfskin businesses are recovering from the
pandemic faster than expected despite continued retail restrictions
and other effects from COVID-19, particularly in Europe. Operating income for the
apparel, gear and other segment increased $24 million to $20
million in the first quarter of 2021 compared to a
$4 million loss in the first quarter
of 2020. The increase was driven by the increased sales,
operating expense and cost of revenue leverage on higher revenue,
favorable foreign currency exchange rates, and increased e-commerce
revenue, partially offset by lower retail revenue at Jack Wolfskin
due to further government-mandated retail shutdowns during the
first quarter in Central
Europe.
Topgolf. The Topgolf business contributed $93 million of net revenue and $4 million of segment operating income, which
represents four weeks of financial results for the Topgolf
business. This is incremental year over year as the Topgolf
business was acquired on March 8,
2021 and therefore was not included in the Company's
financial results in the first quarter of 2020.
Outlook
Given the continued uncertainty related to both the COVID-19
pandemic globally as well as unsettled market conditions, the
Company is not providing specific net revenue and earnings guidance
ranges for 2021 at this time. The Company did, however, provide
certain guidance on estimated 2021 performance. The Company
previously guided that it was assuming that neither the Company's
legacy Callaway business nor the newly added Topgolf business would
achieve 2021 revenue or Adjusted EBITDA equivalent to 2019
levels. The Company has now revised those projections as its
operating segments are recovering faster and performing better than
expected. As a result, the Company now expects that revenue
and Adjusted EBITDA for full year 2021 for the legacy Callaway
business will exceed 2019 levels and for the Topgolf business will
meet or exceed the full twelve-month 2019 levels. For reference, in
2019, the Callaway legacy business reported revenue of $1.70 billion and Adjusted EBITDA of $211 million and the Topgolf business reported
revenue of $1.06 billion and Adjusted
EBITDA of $59 million. Callaway's
reported full year financial results will only include 10 months of
Topgolf results in 2021 and therefore will not include January and
February results which were in the aggregate $143 million in revenue and $2.3 million in Adjusted EBITDA.
Conference Call and Webcast
The Company will be holding a conference call at 2:00 p.m. Pacific time today 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/. To listen to the call, and to access
the Company's presentation materials, please go to the website at
least 15 minutes before the call to register and for instructions
on how to access the broadcast. 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 May 17,
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, and other non-recurring costs, including costs
related to the Topgolf merger and integration, the transition to
the Company's new North American Distribution Center,
implementation of a new IT system for Jack Wolfskin, the
$39 million non-cash valuation
allowance recorded against certain of the Company's deferred tax
assets as a result of the merger, the $253
million non-cash gain as the result of the Company's prior
equity position in Topgolf, 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.
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 financial outlook for 2021 (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 of the Company's products and
continued brand momentum, demand for golf equipment, 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 costs and
supply constraints; 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; competitive 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, on the economy generally,
on the level of demand for the Company's and its subsidiaries'
products 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.
Contacts:
|
Brian
Lynch
|
|
Patrick
Burke
|
|
(760)
931-1771
|
CALLAWAY GOLF
COMPANY
|
CONSOLIDATED
CONDENSED BALANCE SHEETS
|
(Unaudited)
|
(In
thousands)
|
|
|
March 31,
2021
|
|
December 31,
2020
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
397,289
|
|
|
|
$
|
366,119
|
|
Accounts receivable,
net
|
|
328,841
|
|
|
|
138,482
|
|
Inventories
|
|
336,314
|
|
|
|
352,544
|
|
Other current
assets
|
|
140,747
|
|
|
|
55,482
|
|
Total current
assets
|
|
1,203,191
|
|
|
|
912,627
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
1,192,278
|
|
|
|
146,495
|
|
Operating lease
right-of-use assets, net
|
|
1,041,395
|
|
|
|
194,776
|
|
Intangible assets,
net
|
|
3,589,932
|
|
|
|
540,997
|
|
Investment in
golf-related ventures
|
|
7,250
|
|
|
|
111,442
|
|
Other
assets
|
|
74,511
|
|
|
|
74,263
|
|
Total
assets
|
|
$
|
7,108,557
|
|
|
|
$
|
1,980,600
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
138,665
|
|
|
|
$
|
92,792
|
|
Accrued accounts
payable and expenses
|
|
241,051
|
|
|
|
183,417
|
|
Accrued employee
compensation and benefits
|
|
87,658
|
|
|
|
30,937
|
|
Asset-based credit
facilities
|
|
15,279
|
|
|
|
22,130
|
|
Current operating
lease liabilities
|
|
51,510
|
|
|
|
29,579
|
|
Construction
advances
|
|
54,874
|
|
|
|
—
|
|
Deferred
revenue
|
|
70,946
|
|
|
|
2,546
|
|
Other current
liabilities
|
|
36,356
|
|
|
|
29,871
|
|
Total current
liabilities
|
|
696,339
|
|
|
|
391,272
|
|
|
|
|
|
|
|
Long-term
debt
|
|
1,174,990
|
|
|
|
650,564
|
|
Long-term operating
leases
|
|
1,155,551
|
|
|
|
177,996
|
|
Deemed landlord
financing
|
|
221,618
|
|
|
|
—
|
|
Long-term
liabilities
|
|
247,240
|
|
|
|
85,124
|
|
Total Callaway Golf
Company shareholders' equity
|
|
3,612,819
|
|
|
|
675,644
|
|
Total liabilities and
shareholders' equity
|
|
$
|
7,108,557
|
|
|
|
$
|
1,980,600
|
|
CALLAWAY GOLF
COMPANY
|
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(In thousands,
except per share data)
|
|
|
Three Months
Ended
March 31,
|
|
2021
|
|
2020
|
Net
revenues:
|
|
|
|
Products
|
$
|
559,958
|
|
|
$
|
442,276
|
|
Services
|
91,663
|
|
|
—
|
|
Total net
revenues
|
651,621
|
|
|
442,276
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
Cost of
products
|
310,630
|
|
|
246,602
|
|
Cost of services,
excluding depreciation and amortization
|
10,985
|
|
|
—
|
|
Other venue
expenses
|
65,437
|
|
|
—
|
|
Selling, general and
administrative expense
|
173,880
|
|
|
141,754
|
|
Research and
development expense
|
12,745
|
|
|
13,240
|
|
Venue pre-opening
costs
|
1,845
|
|
|
—
|
|
Total costs and
expenses
|
575,522
|
|
|
401,596
|
|
|
|
|
|
Income from
operations
|
76,099
|
|
|
40,680
|
|
Gain on Topgolf
investment
|
252,531
|
|
|
—
|
|
Other expense,
net
|
(8,426)
|
|
|
(2,635)
|
|
Income before
taxes
|
320,204
|
|
|
38,045
|
|
Income tax
provision
|
47,743
|
|
|
9,151
|
|
Net income
|
$
|
272,461
|
|
|
$
|
28,894
|
|
|
|
|
|
Earnings per common
share:
|
|
|
|
Basic
|
$2.32
|
|
|
$0.31
|
|
Diluted
|
$2.19
|
|
|
$0.30
|
|
Weighted-average
common shares outstanding:
|
|
|
|
Basic
|
117,482
|
|
|
94,309
|
|
Diluted
|
124,570
|
|
|
95,676
|
|
|
|
|
|
|
|
|
|
|
|
|
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 statement of operations from that
date forward. Additionally, the Company has modified the
presentation of its consolidated condensed statement of operations
for the three months ended March 31, 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)
|
|
|
Three Months
Ended
March
31,
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
272,461
|
|
|
$
|
28,894
|
|
Adjustments to
reconcile net income to net cash used in operating
activities:
|
|
|
|
Depreciation and amortization
|
20,272
|
|
|
8,997
|
|
Lease
amortization expense
|
10,784
|
|
|
8,517
|
|
Amortization of debt issuance costs
|
1,199
|
|
|
835
|
|
Debt
discount amortization
|
2,866
|
|
|
—
|
|
Deferred
taxes, net
|
46,401
|
|
|
12,409
|
|
Non-cash
share-based compensation
|
4,609
|
|
|
1,861
|
|
Loss on
disposal of long-lived assets
|
—
|
|
|
51
|
|
Gain on
Topgolf investment
|
(252,531)
|
|
|
—
|
|
Unrealized net (gains) losses on hedging instruments and foreign
currency
|
(6,146)
|
|
|
767
|
|
Acquisition costs
|
(15,755)
|
|
|
—
|
|
Changes in assets and
liabilities
|
(162,776)
|
|
|
(156,013)
|
|
Net cash used in
operating activities
|
(78,616)
|
|
|
(93,682)
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(28,821)
|
|
|
(16,953)
|
|
Cash acquired in
merger
|
171,294
|
|
|
—
|
|
Net cash provided by
(used in) investing activities
|
142,473
|
|
|
(16,953)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
—
|
|
|
9,766
|
|
Debt issuance
cost
|
(5,441)
|
|
|
—
|
|
(Repayments of)
proceeds from credit facilities, net
|
(6,851)
|
|
|
191,013
|
|
Repayments of
long-term debt
|
(5,267)
|
|
|
(3,143)
|
|
Payment on contingent
earn-out obligation
|
(3,577)
|
|
|
—
|
|
Repayments of
financing leases
|
(95)
|
|
|
(109)
|
|
Proceeds from lease
financing
|
3,127
|
|
|
—
|
|
Exercise of stock
options
|
257
|
|
|
130
|
|
Dividends
paid
|
(3)
|
|
|
(949)
|
|
Acquisition of
treasury stock
|
(12,501)
|
|
|
(21,938)
|
|
Net cash used in
financing activities
|
(30,351)
|
|
|
174,770
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(2,336)
|
|
|
(4,166)
|
|
Net increase in cash
and cash equivalents
|
31,170
|
|
|
59,969
|
|
Cash and cash
equivalents at beginning of period
|
366,119
|
|
|
106,666
|
|
Cash and cash
equivalents at end of period
|
$
|
397,289
|
|
|
$
|
166,635
|
|
CALLAWAY GOLF
COMPANY
|
Consolidated Net
Sales and Operating Segment Information
|
(Unaudited)
|
(In
thousands)
|
|
|
|
Net Revenues
by Product Category(2)
|
|
|
Three Months
Ended
March
31,
|
|
Growth
|
|
Non-GAAP
Constant
Currency
vs.
2020(1)
|
|
|
2021
|
|
2020
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
Golf Clubs
|
|
$
|
316,353
|
|
|
$
|
251,224
|
|
|
$
|
65,129
|
|
|
25.9%
|
|
23.0%
|
Golf Balls
|
|
60,529
|
|
|
40,437
|
|
|
20,092
|
|
|
49.7%
|
|
46.5%
|
Apparel
|
|
95,289
|
|
|
77,290
|
|
|
17,999
|
|
|
23.3%
|
|
17.8%
|
Gear and
Other
|
|
86,813
|
|
|
73,325
|
|
|
13,488
|
|
|
18.4%
|
|
13.6%
|
Venues
|
|
85,170
|
|
|
—
|
|
|
85,170
|
|
|
100.0%
|
|
100.0%
|
Topgolf
Other
|
|
7,467
|
|
|
—
|
|
|
7,467
|
|
|
100.0%
|
|
100.0%
|
Total net
revenue
|
|
$
|
651,621
|
|
|
$
|
442,276
|
|
|
$
|
209,345
|
|
|
47.3%
|
|
43.6%
|
|
|
|
|
|
|
|
|
|
|
|
(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 the first quarter of 2021 were expanded to
include Topgolf's revenue categories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales by
Region
|
|
|
Three Months
Ended
March
31,
|
|
Growth/(Decline)
|
|
Non-GAAP
Constant
Currency
vs.
2020(1)
|
|
|
2021
|
|
2020
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
388,222
|
|
|
$
|
217,503
|
|
|
$
|
170,719
|
|
|
78.5%
|
|
78.5%
|
Europe
|
|
108,345
|
|
|
96,719
|
|
|
11,626
|
|
|
12.0%
|
|
3.0%
|
Japan
|
|
71,886
|
|
|
77,347
|
|
|
(5,461)
|
|
|
-7.1%
|
|
-9.3%
|
Rest of
World
|
|
83,168
|
|
|
50,707
|
|
|
32,461
|
|
|
64.0%
|
|
51.8%
|
Total net
revenue
|
|
$
|
651,621
|
|
|
$
|
442,276
|
|
|
$
|
209,345
|
|
|
47.3%
|
|
43.6%
|
|
|
|
|
|
|
|
|
|
|
|
(1) Calculated by applying 2020
exchange rates to 2021 reported sales in regions outside the
U.S
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
Information
|
|
|
Three Months
Ended
March
31,
|
|
Growth
|
|
Non-GAAP
Constant
Currency
vs.
2020(1)
|
|
|
2021
|
|
2020
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
Golf
Equipment
|
|
$
|
376,882
|
|
|
$
|
291,661
|
|
|
$
|
85,221
|
|
|
29.2%
|
|
26.3%
|
Apparel, Gear and
Other
|
|
182,102
|
|
|
150,615
|
|
|
31,487
|
|
|
20.9%
|
|
15.8%
|
Topgolf
|
|
92,637
|
|
|
$
|
—
|
|
|
92,637
|
|
|
100.0%
|
|
100.0%
|
Total net
revenue
|
|
$
|
651,621
|
|
|
$
|
442,276
|
|
|
$
|
209,345
|
|
|
47.3%
|
|
43.6%
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating
income:
|
|
|
|
|
|
|
|
|
|
|
Golf
Equipment
|
|
$
|
84,921
|
|
|
$
|
58,620
|
|
|
$
|
26,301
|
|
|
44.9%
|
|
|
Apparel, Gear and
Other
|
|
20,490
|
|
|
(3,799)
|
|
|
24,289
|
|
|
639.4%
|
|
|
Topgolf
|
|
3,954
|
|
|
—
|
|
|
3,954
|
|
|
100.0%
|
|
|
Total segment
operating income
|
|
109,365
|
|
|
54,821
|
|
|
54,544
|
|
|
99.5%
|
|
|
Corporate G&A and
other(2)
|
|
33,266
|
|
|
14,141
|
|
|
19,125
|
|
|
135.2%
|
|
|
Total operating
income
|
|
76,099
|
|
|
40,680
|
|
|
35,419
|
|
|
87.1%
|
|
|
Gain on Topgolf
investment(3)
|
|
252,531
|
|
|
—
|
|
|
252,531
|
|
|
100.0%
|
|
|
Interest expense,
net
|
|
(17,457)
|
|
|
(9,115)
|
|
|
(8,342)
|
|
|
91.5%
|
|
|
Other income,
net
|
|
9,031
|
|
|
6,480
|
|
|
2,551
|
|
|
39.4%
|
|
|
Total income before
income taxes
|
|
$
|
320,204
|
|
|
$
|
38,045
|
|
|
$
|
282,159
|
|
|
741.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $15.8 million for
transaction costs associated with the merger with Topgolf completed
on March 8, 2021, expenses related to the implementation of new IT
systems for Jack Wolfskin, and $3.5 million for non-cash
amortization expense for intangible assets acquired in the merger.
The amount for 2020 also includes $1.5 million for non-recurring
costs associated with the Company's transition to its new North
America Distribution Center and integration costs associated with
Jack Wolfskin
|
(3) 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
March
31,
|
|
Growth
|
|
|
2021
|
|
2019
|
|
Dollars
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
Golf
Equipment
|
|
$
|
376,882
|
|
|
$
|
323,619
|
|
|
$
|
53,263
|
|
|
16.5%
|
Apparel, Gear and
Other
|
|
182,102
|
|
|
192,578
|
|
|
(10,476)
|
|
|
-5.4%
|
Topgolf
|
|
92,637
|
|
|
—
|
|
|
92,637
|
|
|
100.0%
|
Total net
revenue
|
|
$
|
651,621
|
|
|
$
|
516,197
|
|
|
$
|
135,424
|
|
|
26.2%
|
|
|
|
|
|
|
|
|
|
Segment operating
income:
|
|
|
|
|
|
|
|
Golf
Equipment
|
|
$
|
84,921
|
|
|
$
|
70,652
|
|
|
$
|
14,269
|
|
|
20.2%
|
Apparel, Gear and
Other
|
|
20,490
|
|
|
22,060
|
|
|
(1,570)
|
|
|
7.1%
|
Topgolf
|
|
3,954
|
|
|
—
|
|
|
3,954
|
|
|
100.0%
|
Total segment
operating income
|
|
109,365
|
|
|
92,712
|
|
|
16,653
|
|
|
18.0%
|
Corporate G&A and
other(1)
|
|
33,266
|
|
|
23,076
|
|
|
10,190
|
|
|
44.2%
|
Total operating
income
|
|
76,099
|
|
|
69,636
|
|
|
6,463
|
|
|
9.3%
|
Gain on Topgolf
investment(2)
|
|
252,531
|
|
|
—
|
|
|
252,531
|
|
|
100.0%
|
Interest expense,
net
|
|
(17,457)
|
|
|
(9,639)
|
|
|
(7,818)
|
|
|
81.1%
|
Other
income/(expense), net
|
|
9,031
|
|
|
(1,940)
|
|
|
10,971
|
|
|
-565.5%
|
Total income before
income taxes
|
|
$
|
320,204
|
|
|
$
|
58,057
|
|
|
$
|
262,147
|
|
|
451.5%
|
|
|
|
|
|
|
|
|
|
(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 2021 includes $15.8 million for transaction costs
associated with the merger with Topgolf completed on March 8, 2021,
expenses related to the implementation of new IT systems for Jack
Wolfskin, and $3.5 million for non-cash amortization expense for
intangible assets acquired in the merger. The amount for 2019 also
includes $5.4 million in amortization charges related to the fair
value adjustment to Jack Wolfskin's inventory, as well as $4.7
million for transaction costs associated with the acquisition of
Jack Wolfskin
|
(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
March 31,
|
|
|
2021
|
|
2020
|
|
|
GAAP
|
|
Non-Cash
Amortization(1)
|
|
Non-Cash
Amortization
of Discount on
Convertible
Notes(2)
|
|
Acquisition
& Other
Non-
Recurring
Charges(3)
|
|
Tax
Valuation
Allowance(4)
|
|
Non-
GAAP
|
|
GAAP
|
|
Non-Cash
Intangible
Amortization(1)
|
|
Other Non-
Recurring
Expenses(3)
|
|
Non-
GAAP
|
|
Net
revenues
|
$
|
651,621
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
651,621
|
|
|
$
|
442,276
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
442,276
|
|
|
Total costs and
expenses
|
575,522
|
|
|
3,513
|
|
|
—
|
|
|
16,937
|
|
|
—
|
|
|
555,072
|
|
|
401,596
|
|
|
1,179
|
|
|
1,549
|
|
|
398,868
|
|
|
Income (loss) from
operations
|
76,099
|
|
|
(3,513)
|
|
|
—
|
|
|
(16,937)
|
|
|
—
|
|
|
96,549
|
|
|
40,680
|
|
|
(1,179)
|
|
|
(1,549)
|
|
|
43,408
|
|
|
Other
income/(expense), net
|
244,105
|
|
|
(293)
|
|
|
(2,535)
|
|
|
252,432
|
|
|
—
|
|
|
(5,499)
|
|
|
(2,635)
|
|
|
—
|
|
|
—
|
|
|
(2,635)
|
|
|
Income tax provision
(benefit)
|
47,743
|
|
|
(913)
|
|
|
(608)
|
|
|
(4,089)
|
|
|
38,927
|
|
|
14,426
|
|
|
9,151
|
|
|
(271)
|
|
|
(356)
|
|
|
9,778
|
|
|
Net income
(loss)
|
$
|
272,461
|
|
|
$
|
(2,893)
|
|
|
$
|
(1,927)
|
|
|
$
|
239,584
|
|
|
$
|
(38,927)
|
|
|
$
|
76,624
|
|
|
$
|
28,894
|
|
|
$
|
(908)
|
|
|
$
|
(1,193)
|
|
|
$
|
30,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share:
|
$2.19
|
|
|
($0.02)
|
|
|
($0.02)
|
|
|
$1.92
|
|
|
($0.31)
|
|
|
$0.62
|
|
|
$0.30
|
|
|
($0.01)
|
|
|
($0.01)
|
|
|
$0.32
|
|
|
Weighted-average
shares outstanding:
|
124,570
|
|
|
124,570
|
|
|
124,570
|
|
|
124,570
|
|
|
124,570
|
|
|
124,570
|
|
|
95,676
|
|
|
95,676
|
|
|
95,676
|
|
|
95,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents amortization expense
of intangible assets in both 2021 and 2020 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 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) Acquisition and other
non-recurring charges in 2021 includes transaction costs associated
with the merger with Topgolf completed on March 8, 2021, the
recognition of a $252.5 million gain on the Company's pre-merger
investment in Topgolf, and expenses related to the
implementation of new IT systems for Jack Wolfskin. 2020 includes
non-recurring costs associated with the Company's transition to its
new North America Distribution Center, in addition to other
integration costs associated with Jack Wolfskin
|
(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
|
CALLAWAY GOLF
COMPANY
|
Non-GAAP
Reconciliation and Supplemental Financial
Information
|
(Unaudited)
|
(In
thousands)
|
|
|
2021 Trailing
Twelve Month Adjusted EBITDA
|
|
2020 Trailing
Twelve Month Adjusted EBITDA
|
|
Quarter
Ended
|
|
Quarter
Ended
|
|
June
30,
|
|
September
30,
|
|
December
31,
|
|
March
31,
|
|
|
|
June
30,
|
|
September
30,
|
|
December
31,
|
|
March
31,
|
|
|
|
2020
|
|
2020
|
|
2020
|
|
2021
|
|
Total
|
|
2019
|
|
2019
|
|
2019
|
|
2020
|
|
Total
|
Net income
(loss)
|
$
|
(167,684)
|
|
|
$
|
52,432
|
|
|
$
|
(40,576)
|
|
|
$
|
272,461
|
|
|
$
|
116,633
|
|
|
$
|
28,931
|
|
|
$
|
31,048
|
|
|
$
|
(29,218)
|
|
|
$
|
28,894
|
|
|
$
|
59,655
|
|
Interest expense,
net
|
12,163
|
|
|
12,727
|
|
|
12,927
|
|
|
17,457
|
|
|
55,274
|
|
|
10,260
|
|
|
9,545
|
|
|
9,049
|
|
|
9,115
|
|
|
37,969
|
|
Income tax provision
(benefit)
|
(7,931)
|
|
|
5,360
|
|
|
(7,124)
|
|
|
47,743
|
|
|
38,048
|
|
|
7,208
|
|
|
2,128
|
|
|
(2,352)
|
|
|
9,151
|
|
|
16,135
|
|
Depreciation and
amortization expense
|
9,360
|
|
|
10,311
|
|
|
10,840
|
|
|
20,272
|
|
|
50,783
|
|
|
9,022
|
|
|
8,472
|
|
|
9,480
|
|
|
8,997
|
|
|
35,971
|
|
JW goodwill and trade
name impairment
|
174,269
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
174,269
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-cash stock
compensation expense
|
2,942
|
|
|
3,263
|
|
|
2,861
|
|
|
4,609
|
|
|
13,675
|
|
|
3,530
|
|
|
2,513
|
|
|
3,418
|
|
|
1,861
|
|
|
11,322
|
|
Non-cash lease
amortization expense
|
207
|
|
|
(99)
|
|
|
(76)
|
|
|
872
|
|
|
904
|
|
|
(9)
|
|
|
(36)
|
|
|
(120)
|
|
|
264
|
|
|
99
|
|
Acquisitions &
other non-recurring costs, before taxes(1)
|
5,856
|
|
|
2,858
|
|
|
8,607
|
|
|
(235,594)
|
|
|
(218,273)
|
|
|
6,939
|
|
|
3,009
|
|
|
4,090
|
|
|
1,516
|
|
|
15,554
|
|
Adjusted
EBITDA
|
$
|
29,182
|
|
|
$
|
86,852
|
|
|
$
|
(12,541)
|
|
|
$
|
127,820
|
|
|
$
|
231,313
|
|
|
$
|
65,881
|
|
|
$
|
56,679
|
|
|
$
|
(5,653)
|
|
|
$
|
59,798
|
|
|
$
|
176,705
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) In 2021, amounts include
transaction costs associated with the merger with Topgolf completed
on March 8, 2021, the recognition of a $252.5 million gain to
step-up the Company's former investment in Topgolf to its fair
value in connection with the merger, and expenses related to the
implementation of new IT systems for Jack Wolfskin. In 2020,
amounts include costs associated with the Company's transition to
its new North America Distribution Center and the implementation of
new IT systems for Jack Wolfskin, as well as $4.8 million of
severance related to the Company's cost reduction
initiatives.
|
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SOURCE Callaway Golf Company