CARLSBAD, Calif., Sept. 7, 2021 /PRNewswire/ -- Callaway Golf
Company (the "Company" or "Callaway") (NYSE: ELY) today provided a
business update and increased its financial outlook for the third
quarter and full year 2021.
"I am very pleased with how our teams are navigating the rapidly
changing business environment resulting from COVID-19 and its many
variants," commented Chip Brewer,
President and Chief Executive Officer of Callaway. "The updated
guidance we are providing today reflects not only the continued
overperformance and strength of our diversified portfolio but also
our operational flexibility, which is allowing us to adapt and
react as business conditions change. While our visibility into the
remainder of the year remains murky, our revised guidance reflects
the best information we have about the short-term disruption to our
supply chain and the continued momentum of our businesses. Looking
ahead to 2022 and beyond, we are excited about the strong growth
embedded within our unique platform of businesses and are committed
to unlocking additional long-term value for our shareholders."
The Company's increased financial outlook is primarily
attributable to the following:
- Mitigation of Supply Chain Disruption. The Company has been
able to mitigate a significant portion of the third quarter
Vietnam supply chain disruption by
shifting some production capacity to non-Vietnam suppliers. Based upon further
information from its suppliers, the Company now estimates that the
remaining risk related to the Vietnam supply chain has shifted from the
third quarter to the fourth quarter. The amount by which the fourth
quarter will be impacted will depend upon when, and at what pace,
the supply chain in Vietnam
reopens. The Company has included in its guidance today its current
estimates of the supply chain disruption.
- Overperformance. The Company's Topgolf business, particularly
its walk-in and social events business, performed ahead of
expectations in July and August and the Company's TravisMathew and
Jack Wolfskin apparel businesses exhibited continued brand momentum
with both brands exceeding expectations in the first two months of
the third quarter. Demand in the golf equipment business has also
remained strong. With more supply than originally expected, the
Golf Equipment business is expected to outperform prior guidance
for the balance of the year.
- Deferred Operating Expenditures. With the increase in the Delta
variant, the Company plans to defer a portion of its planned
operating expenditures in the second half of 2021 to 2022,
including delayed hiring of planned positions, travel and some
event-based marketing expenses.
Updated Business Outlook
The Company emphasized that
it has limited visibility into the balance of the year due to the
continued impact of COVID-19 and its variants on the Company's
businesses and supply chain. The third quarter and full year 2021
projections set forth below are based on the Company's best
estimates at this time. These estimates assume no further
significant disruption to the Company's operations or supply chain
due to the pandemic or otherwise.
Full Year 2021 Estimates*
(in
millions)
|
Current Full
Year
2021 Estimate
|
Previous Full
Year
2021 Estimate
|
|
Full Year
2020
Results
|
Full Year
2019
Results
|
Net
Revenue
|
$3,065 –
$3,095
|
$3,025 –
$3,055
|
|
$1,590
|
$1,701
|
Adjusted
EBITDA
|
$370 –
$390
|
$345 –
$360
|
|
$163
|
$210
|
*Due to the timing of the Topgolf acquisition on March 8, 2021, 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 $142.9
million in revenue and $2.3
million in Adjusted EBITDA.
Third Quarter 2021 Estimates
(in
millions)
|
Current Q3
2021
Estimate
|
Previous Q3
2021
Estimate
|
|
Q3
2020
Results
|
Q3
2019
Results
|
Net
Revenue
|
$850 –
$860
|
$775 –
$790
|
|
$476
|
$426
|
Adjusted
EBITDA
|
$105 –
$110
|
$51 – $58
|
|
$87
|
$57
|
Non-GAAP Information
The GAAP financial measures contained in this press release have
been prepared in accordance with accounting principles generally
accepted in the United States
("GAAP"). To supplement the GAAP financial measures, the
Company has provided certain non-GAAP financial information as
follows:
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 certain non-recurring and
non-cash items, including those referenced below.
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, other non-recurring costs and non-cash adjustments.
In 2021, forecasted non-recurring costs include (i) costs related
to the merger and integration with Topgolf, (ii) a $253 million non-cash gain recognized on the
Company's pre-merger equity position in Topgolf, and (iii) costs
related to the implementation of new IT systems. Non-recurring
costs in 2020 include (i) costs associated with the merger with
Topgolf, (ii) severance costs related to the Company's COVID
cost-reduction initiatives, (iii) costs related to the Company's
transition to its new North American Distribution Center, and
(iv) costs associated with the implementation of a new IT system
for Jack Wolfskin, in addition to a non-cash impairment charge of
$174 million related to the Jack
Wolfskin goodwill and trade name. Non-recurring costs in 2019
include transaction and transition costs and the recognition of a
foreign currency contract loss related to a hedge on the purchase
price of Jack Wolfskin, and consulting costs to address an activist
investor. In 2020 and 2021, non-cash amortization expense includes
the amortization of the debt discount related to the Company's
convertible notes issued in May 2020.
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 the full year and third quarter of
2021 (including revenue, Adjusted EBITDA and operating
expenditures), 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, demand and availability of the
Company's products and services, continued brand momentum, demand
for golf and outdoor apparel, continued investments in the
business, operational flexibility, ability to mitigate the impact
from supply chain disruptions, increases in long-term 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 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 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
2021 Adjusted
EBITDA Guidance Reconciliation to GAAP
(Unaudited)
(In
millions)
|
|
|
|
Three Months
Ended
September 30, 2021
|
|
Twelve Months
Ended
December 31, 2021
|
|
|
|
|
Net income
|
$11 - $14
|
|
$249 -$
265
|
|
|
|
|
Adjusted
EBITDA(1)
|
$105 -
$110
|
|
$370 -
$390
|
|
|
|
|
|
|
|
|
|
(1)
Adjusted EBITDA excludes the following from forecasted net income:
Interest expense, taxes, depreciation and amortization expense,
non-cash stock compensation expense, non-cash lease amortization
expense, transaction and transition 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. A forecast of each of these line items is not available
without unreasonable efforts due to the variability of many of
these items and the inability to predict them with certainty.
Accordingly, we have not provided a further reconciliation of
Adjusted EBITDA to GAAP net income by line item.
|
CALLAWAY GOLF
COMPANY
Non-GAAP
Reconciliation and Supplemental Financial
Information
(Unaudited)
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Adjusted
EBITDA
|
|
2019 Adjusted
EBITDA
|
|
|
Quarter
Ended
|
|
Quarter
Ended
|
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
December
31,
|
|
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
December
31,
|
|
|
|
|
2020
|
|
2020
|
|
2020
|
|
2020
|
|
Total
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
Total
|
Net income
(loss)
|
|
$
|
28,894
|
|
|
$
|
(167,684)
|
|
|
$
|
52,432
|
|
|
$
|
(40,576)
|
|
|
$
|
(126,934)
|
|
|
$
|
48,647
|
|
|
$
|
28,931
|
|
|
$
|
31,048
|
|
|
$
|
(29,218)
|
|
|
$
|
79,408
|
|
Interest expense,
net
|
|
9,115
|
|
|
12,163
|
|
|
12,727
|
|
|
12,927
|
|
|
46,932
|
|
|
9,639
|
|
|
10,260
|
|
|
9,545
|
|
|
9,049
|
|
|
38,493
|
|
Income tax provision
(benefit)
|
|
9,151
|
|
|
(7,931)
|
|
|
5,360
|
|
|
(7,124)
|
|
|
(544)
|
|
|
9,556
|
|
|
7,208
|
|
|
2,128
|
|
|
(2,352)
|
|
|
16,540
|
|
Depreciation and
amortization expense
|
|
8,997
|
|
|
9,360
|
|
|
10,311
|
|
|
10,840
|
|
|
39,508
|
|
|
7,977
|
|
|
9,022
|
|
|
8,472
|
|
|
9,480
|
|
|
34,951
|
|
JW goodwill and trade
name impairment
|
|
—
|
|
|
174,269
|
|
|
—
|
|
|
—
|
|
|
174,269
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-cash stock
compensation expense
|
|
1,861
|
|
|
2,942
|
|
|
3,263
|
|
|
2,861
|
|
|
10,927
|
|
|
3,435
|
|
|
3,530
|
|
|
2,513
|
|
|
3,418
|
|
|
12,896
|
|
Non-cash lease
amortization expense
|
|
264
|
|
|
207
|
|
|
(99)
|
|
|
(76)
|
|
|
296
|
|
|
(140)
|
|
|
(9)
|
|
|
(36)
|
|
|
(120)
|
|
|
(305)
|
|
Acquisitions &
other non-recurring costs,
before taxes(1)
|
|
1,516
|
|
|
5,856
|
|
|
2,858
|
|
|
8,607
|
|
|
18,837
|
|
|
13,986
|
|
|
6,939
|
|
|
3,009
|
|
|
4,090
|
|
|
28,024
|
|
Adjusted
EBITDA
|
|
$
|
59,798
|
|
|
$
|
29,182
|
|
|
$
|
86,852
|
|
|
$
|
(12,541)
|
|
|
$
|
163,291
|
|
|
$
|
93,100
|
|
|
$
|
65,881
|
|
|
$
|
56,679
|
|
|
$
|
(5,653)
|
|
|
$
|
210,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Acquisitions and other
non-recurring costs for the year ended December 31, 2020 include
(i) costs associated with the Topgolf merger of $8.5 million,
consisting of legal, professional and SEC filing fees; (ii) $5.6
million of severance related to the Company's cost reduction
initiatives in response to the COVID-19 pandemic; (iii) costs
related to the Company's transition to its new North America
Distribution Center; and (iv) IT consulting costs related to the
implementation of new IT systems for Jack Wolfskin. These amounts
exclude any depreciation or amortization, which has been presented
in a separate line above.
|
|
Acquisitions and
other non-recurring costs for the year ended December 31, 2019
include (i) $4.7 million of transaction costs associated with the
acquisition of Jack Wolfskin, including banker's fees, legal fees,
consulting and travel expenses; (ii) $5.5 million of costs
associated with transitioning and reporting on the Jack Wolfskin
business, including consulting fees, audit fees for SEC reporting
requirements and valuation services associated with preparing Jack
Wolfskin's opening balance sheet; (iii) the recognition of a $3.9
million foreign currency exchange loss primarily related to the
re-measurement of a foreign currency contract established to
mitigate the risk of foreign currency fluctuations on the purchase
price of Jack Wolfskin, which was denominated in Euros; and (iv)
consulting fees to address an activist investor. These amounts
exclude any depreciation or amortization, which has been presented
in a separate line above.
|
|
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