CARLSBAD, Calif., Nov. 9, 2021 /PRNewswire/ -- Callaway Golf
Company (the "Company" or "Callaway") (NYSE: ELY) announced today
its financial results for the third quarter and nine months ended
September 30, 2021.
"Callaway's third quarter performance highlights the significant
growth and profitability embedded in our business, as all segments
have recovered more quickly than we anticipated and are delivering
results ahead of plan," commented Chip
Brewer, President and Chief Executive Officer of Callaway.
"Our golf equipment and apparel businesses are benefiting from
sustained enthusiasm for the sport of golf and outdoor exploration,
while Topgolf's fun, inclusive, social environment is in high
demand among customers of all skill levels and ages. This powerful
combination of off-course and on-course golf, entertainment, dining
and outdoor living is unlike any other company in the market today
and is poised for long-term growth as we continue to execute our
strategy. We are committed to driving value for our shareholders
and believe our brands are well-positioned to deliver sustainable,
long-term growth as we look ahead to 2022 and beyond."
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 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 FINANCIAL RESULTS
The Company announced the following GAAP and non-GAAP financial
results for the third quarter and nine months ended September 30, 2021 (in millions, except
EPS):
GAAP
RESULTS
|
|
Q3
2021
|
Q3
2020
|
Change
|
|
YTD
2021
|
YTD
2020
|
Change
|
Net
Revenue
|
$856
|
$476
|
$381
|
|
$2,422
|
$1,215
|
$1,207
|
Income from
Operations
|
$76
|
$64
|
$12
|
|
$259
|
$(73)
|
$332
|
Other
Income/(Expense), net
|
$(26)
|
$(6)
|
$(20)
|
|
$187
|
$(7)
|
$194
|
Income (Loss) before
Income Taxes
|
$50
|
$58
|
$(8)
|
|
$446
|
$(80)
|
$526
|
Net Income
(Loss)
|
$(16)
|
$52
|
$(68)
|
|
$348
|
$(86)
|
$434
|
Earnings (Loss) Per
Share - diluted
|
$(0.09)
|
$0.54
|
$(0.63)
|
|
$2.03
|
$(0.92)
|
$2.95
|
NON-GAAP
RESULTS
|
|
Q3
2021
|
Q3
2020
|
Change
|
|
YTD
2021
|
YTD
2020
|
Change
|
Net
Revenue
|
$856
|
$476
|
$381
|
|
$2,422
|
$1,215
|
$1,207
|
Income from
Operations
|
$85
|
$70
|
$15
|
|
$299
|
$117
|
$182
|
Other
Income/(Expense), net
|
$(22)
|
$(3)
|
$(19)
|
|
$(54)
|
$(3)
|
$(51)
|
Income before income
taxes
|
$63
|
$67
|
$(4)
|
|
$245
|
$114
|
$131
|
Net Income
|
$26
|
$59
|
$(33)
|
|
$173
|
$95
|
$78
|
Earnings Per Share -
diluted
|
$0.14
|
$0.61
|
$(0.47)
|
|
$1.01
|
$0.99
|
$0.02
|
Adjusted
EBITDA
|
$139
|
$88
|
$51
|
|
$431
|
$177
|
$254
|
Third Quarter 2021 Financial Highlights
- Net revenue increase was driven by Topgolf same venue sales,
which were in line with third quarter 2019 pre-pandemic levels, and
higher-than-expected strength across both the Golf Equipment and
Apparel, Gear and Other segments, as demand remained high for golf
and outdoor activities.
- Non-GAAP income from operations increased $15 million year-over-year, led by the addition
of $24 million in operating income
from the Topgolf business and a $9
million increase in operating income from the Apparel, Gear
and Other business, but partially offset by lower golf equipment
operating income as spending levels returned to normal levels
versus the lower levels seen in 2020.
- Non-GAAP other income/(expense), net decreased $(19) million to $(22)
million, primarily due to a $16
million increase in interest expense related to the addition
of Topgolf as well as lower hedge gains versus the prior year
period.
- Non-GAAP earnings per diluted share was $0.14 in the third quarter of 2021, compared to
$0.61 per share in the third quarter
of 2020. Fully diluted shares were 194 million shares of common
stock in the third quarter of 2021, an increase of 97 million
shares compared to 97 million shares in the third quarter of 2020.
The increased share count is primarily related to the issuance of
additional shares in connection with the Topgolf merger.
- The Adjusted EBITDA increase of $51
million was driven by a $59
million contribution from the Topgolf business, and was
partially offset by increased operating expenditures and the legacy
business spending levels returned to normal levels.
- Subsequent to quarter-end, on November
1, 2021, Callaway announced a $30
million minority investment in Five Iron Golf, an emerging,
privately-owned, urban indoor golf and entertainment company
offering simulator rentals, golf lessons, custom club fittings,
social events and a curated food and beverage menu.
SEGMENT RESULTS
The following is a reconciliation of income before income taxes
to total segment operating income (in millions) for the third
quarter and nine months of 2021 and 2020:
|
Q3 2021
|
Q3 2020
|
Change
|
|
YTD 2021
|
YTD 2020
|
Change
|
Total segment
operating income
|
$104
|
83
|
$21
|
|
$352
|
$155
|
$197
|
Reconciling
items*
|
$(28)
|
$(19)
|
$(9)
|
|
$(92)
|
$(54)
|
$(38)
|
Goodwill and
Trademark Impairment
|
$—
|
$—
|
$—
|
|
$—
|
$(174)
|
$174
|
Income from
Operations
|
$76
|
$64
|
$12
|
|
$259
|
$(73)
|
$332
|
Gain on Topgolf
Investment
|
$—
|
$—
|
$—
|
|
$253
|
$—
|
$253
|
Interest
Expense
|
$(29)
|
$(13)
|
$(16)
|
|
$(75)
|
$(34)
|
$(41)
|
Other
Income
|
$3
|
$7
|
$(4)
|
|
$9
|
$27
|
$(18)
|
Income before income
taxes
|
$50
|
$58
|
$(8)
|
|
$446
|
$(80)
|
$526
|
*Reconciling items
exclude corporate overhead and certain non-recurring and non-cash
items as described in the schedules to this release.
|
Third Quarter 2021 Segment Highlights
- Topgolf
-
- Contributed $334 million of
revenue and $24 million of segment
operating income in the third quarter of 2021, driven primarily by
strong domestic venue walk-in traffic, better-than-expected event
bookings, and new incremental venue openings
- Same venue sales surpassed expectations in the quarter,
increasing to approximately 100% of the 2019 level and generating
strong flow-through to Adjusted EBITDA
- Opened eight new domestic locations in the first nine months of
2021, including two locations opened during the third quarter of
2021; one additional planned location expected to open in the
fourth quarter of 2021
- Golf equipment
-
- Revenue increased 8.4% year-over-year and 37.6% compared to
third quarter 2019 pre-pandemic levels, driven by the continued
strong demand for golf products and participation in the game and
improved supply chain performance
- Golf club sales increased 9.5% year-over-year and 36.5%
compared to third quarter 2019 pre-pandemic levels, amid
significant growth in sales volume across all major product
categories resulting from continued unprecedented momentum in the
golf business and the success of the new EPIC woods and APEX irons,
which outweighed supply chain disruptions
- Golf ball sales increased 4.1% during the quarter and 41.8%
compared to third quarter 2019 pre-pandemic levels, as demand and
market share increased
- Golf Equipment segment operating income decreased 19.3% due to
higher freight costs and a return to more normal levels of
spend
- Apparel, Gear and Other
-
- Revenue increased 11.9% year-over-year, driven by a 19.6%
increase in apparel sales across TravisMathew, Jack Wolfskin and
Callaway brands, despite global supply chain headwinds
- Operating income for the Apparel, Gear and Other segment
increased $9 million year-over-year
to $35 million in the third quarter
of 2021
The table below provides the breakout of segment revenues and
segment operating income for the third quarter and nine months
ended September 30, 2021:
Segment Net
Revenue
|
Q3 2021
|
Q3 2020
|
Change
|
|
YTD 2021
|
YTD 2020
|
Change
|
Topgolf
|
$334
|
$—
|
$334
|
|
$752
|
$—
|
$752
|
Golf
Equipment
|
$290
|
$267
|
$23
|
|
$1,068
|
$769
|
$299
|
Apparel, Gear and
Other
|
$233
|
$208
|
$25
|
|
$602
|
$446
|
$156
|
Total Segment Net
Revenue
|
$856
|
$476
|
$381
|
|
$2,422
|
$1,215
|
$1,207
|
Total Segment
Operating Income
|
Q3 2021
|
Q3 2020
|
Change
|
|
YTD 2021
|
YTD 2020
|
Change
|
Topgolf
|
$24
|
$—
|
$24
|
|
$52
|
$—
|
$52
|
% of segment
revenue
|
7.2%
|
—
|
—
|
|
6.9%
|
—
|
—
|
Golf
Equipment
|
$46
|
$57
|
$(11)
|
|
$229
|
$145
|
$84
|
% of segment
revenue
|
15.9%
|
21.3%
|
(540) bps
|
|
21.4%
|
18.9%
|
250 bps
|
Apparel, Gear and
Other
|
$35
|
$26
|
$9
|
|
$71
|
$10
|
$61
|
% of segment
revenue
|
15.0%
|
12.5%
|
250 bps
|
|
11.8%
|
2.2%
|
960 bps
|
Total segment
operating income
|
$104
|
$83
|
$21
|
|
$352
|
$155
|
$197
|
% of segment
revenue
|
12.1%
|
17.4%
|
(530)
bps
|
|
14.5%
|
12.8%
|
170
bps
|
BUSINESS OUTLOOK
The full year 2021 projections set forth below are based on the
Company's best estimates at this time. They include the estimated
impact of certain factors, including (1) ongoing impact of COVID-19
on the supply chain, (2) changes in foreign currency effects, which
are estimated to have a positive full year impact of $33 million on net sales, and (3) increased
freight costs. In addition, due to the timing of the Topgolf
acquisition on March 8, 2021,
Callaway's reported full year financial results will only include
approximately ten 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.
FULL YEAR
2021
|
(in
millions)
|
Current
2021 Estimate
|
Previous
2021 Estimate
|
2020 Results
|
2019 Results
|
Net
Revenue
|
$3,110 -
$3,120
|
$3,065 -
$3,095
|
$1,590
|
$1,701
|
Adjusted
EBITDA
|
$424 -
$430
|
$370 -
$390
|
$163
|
$210
|
Net Revenue: Full year 2021 net revenue estimate assumes
Topgolf segment revenue for the 10 months beginning March 8, 2021 slightly above 2019 full year
levels of $1,059 million, as well as
continued positive demand fundamentals for Callaway's Golf
Equipment and Apparel, Gear and Other segments, as well as improved
supply in Golf Equipment in the fourth quarter.
Adjusted EBITDA: Full year 2021 Adjusted EBITDA estimate
assumes the Topgolf segment will deliver approximately $158 million in Adjusted EBITDA for the ten
months beginning March 8, 2021, amid
strong revenue flow-through.
ADDITIONAL INFORMATION AND DISCLOSURES
Conference Call and Webcast
The Company will be holding a conference call at 2:00 p.m. Pacific time today, November 9, 2021, 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/. 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 November 16,
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, severance costs related to the Company's
cost-reduction initiatives, and other non-recurring costs,
including costs related to the merger and integration with Topgolf,
transition to the Company's new North American Distribution Center,
implementation of new IT systems, the cumulative $39 million non-cash valuation allowance recorded
against certain of the Company's deferred tax assets as a result of
the Topgolf merger, the $253 million
non-cash gain as the result of the Company's prior equity position
in Topgolf, the $174 million non-cash
impairment charge related to the Jack Wolfskin goodwill and trade
name, 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.
Definitions
Same venue sales. Callaway defines same venue sales for
its Topgolf business as sales for the comparable venue base, which
is defined as the number of Company-operated venues with at least
24 full fiscal months of operations.
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 full year 2021 guidance (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 and demand of the Company's products and
services, continued brand momentum, demand for golf and outdoor
activities and apparel, continued investments in the business,
increases in 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; global supply chain constraints and
challenges; 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
|
CONSOLIDATED
CONDENSED BALANCE SHEETS
|
(Unaudited)
|
(In
thousands)
|
|
|
September 30, 2021
|
|
December 31,
2020
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
508,177
|
|
|
|
$
|
366,119
|
|
Restricted
Cash
|
|
1,754
|
|
|
|
—
|
|
Accounts receivable,
net
|
|
255,223
|
|
|
|
138,482
|
|
Inventories
|
|
385,311
|
|
|
|
352,544
|
|
Other current
assets
|
|
188,946
|
|
|
|
55,482
|
|
Total current
assets
|
|
1,339,411
|
|
|
|
912,627
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
1,330,326
|
|
|
|
146,495
|
|
Operating lease
right-of-use assets, net
|
|
1,066,124
|
|
|
|
194,776
|
|
Intangible assets,
net
|
|
3,562,222
|
|
|
|
540,997
|
|
Other
assets
|
|
99,296
|
|
|
|
185,705
|
|
Total
assets
|
|
$
|
7,397,379
|
|
|
|
$
|
1,980,600
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
453,638
|
|
|
|
$
|
276,209
|
|
Accrued employee
compensation and benefits
|
|
115,946
|
|
|
|
30,937
|
|
Asset-based credit
facilities
|
|
30,108
|
|
|
|
22,130
|
|
Current operating
lease liabilities
|
|
55,507
|
|
|
|
29,579
|
|
Construction
advances
|
|
54,264
|
|
|
|
—
|
|
Deferred
revenue
|
|
84,359
|
|
|
|
2,546
|
|
Other current
liabilities
|
|
46,333
|
|
|
|
29,871
|
|
Total current
liabilities
|
|
840,155
|
|
|
|
391,272
|
|
|
|
|
|
|
|
Long-term
debt
|
|
1,049,019
|
|
|
|
650,564
|
|
Long-term operating
leases
|
|
1,181,443
|
|
|
|
177,996
|
|
Deemed landlord
financing
|
|
312,027
|
|
|
|
—
|
|
Deferred tax
liability
|
|
241,205
|
|
|
|
58,628
|
|
Long-term
liabilities
|
|
51,604
|
|
|
|
26,496
|
|
Total Callaway Golf
Company shareholders' equity
|
|
3,721,926
|
|
|
|
675,644
|
|
Total liabilities and
shareholders' equity
|
|
$
|
7,397,379
|
|
|
|
$
|
1,980,600
|
|
CALLAWAY GOLF
COMPANY
|
CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(In thousands,
except per share data)
|
|
|
Three Months
Ended September 30,
|
|
2021
|
|
2020
|
Net
revenues:
|
|
|
|
Products
|
$
|
527,064
|
|
|
$
|
475,559
|
|
Services
|
329,397
|
|
|
—
|
|
Total net
revenues
|
856,461
|
|
|
475,559
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
Cost of
products
|
288,364
|
|
|
274,826
|
|
Cost of services,
excluding depreciation and amortization
|
40,070
|
|
|
—
|
|
Other venue
expenses
|
215,841
|
|
|
—
|
|
Selling, general and
administrative expense
|
217,736
|
|
|
127,085
|
|
Research and
development expense
|
15,753
|
|
|
10,139
|
|
Venue pre-opening
costs
|
2,687
|
|
|
—
|
|
Total costs and
expenses
|
780,451
|
|
|
412,050
|
|
|
|
|
|
Income from
operations
|
76,010
|
|
|
63,509
|
|
Other expense,
net
|
(25,772)
|
|
|
(5,717)
|
|
Income before income
taxes
|
50,238
|
|
|
57,792
|
|
Income tax
provision
|
66,229
|
|
|
5,360
|
|
Net
income (loss)
|
$
|
(15,991)
|
|
|
$
|
52,432
|
|
|
|
|
|
Earnings (loss) per
common share:
|
|
|
|
Basic
|
$(0.09)
|
|
|
$0.56
|
|
Diluted
|
$(0.09)
|
|
|
$0.54
|
|
Weighted-average
common shares outstanding:
|
|
|
|
Basic
|
185,963
|
|
|
94,171
|
|
Diluted
|
185,963
|
|
|
96,612
|
|
|
|
|
|
|
Nine Months
Ended September 30,
|
|
2021
|
|
2020
|
Net
revenues:
|
|
|
|
Products
|
$
|
1,678,432
|
|
|
$
|
1,214,831
|
|
Services
|
743,291
|
|
|
—
|
|
Total net
revenues
|
2,421,723
|
|
|
1,214,831
|
|
|
|
|
|
Costs and
expenses:
|
|
|
|
Cost of
products
|
914,002
|
|
|
696,369
|
|
Cost of services,
excluding depreciation and amortization
|
93,841
|
|
|
—
|
|
Other venue
expenses
|
483,617
|
|
|
—
|
|
Selling, general and
administrative expense
|
612,740
|
|
|
384,054
|
|
Research and
development expense
|
48,769
|
|
|
33,399
|
|
Goodwill and tradename
impairment
|
—
|
|
|
174,269
|
|
Venue pre-opening
costs
|
9,376
|
|
|
—
|
|
Total costs and
expenses
|
2,162,345
|
|
|
1,288,091
|
|
|
|
|
|
Income (loss) from
operations
|
259,378
|
|
|
(73,260)
|
|
Gain on Topgolf
investment
|
252,531
|
|
|
—
|
|
Other expense,
net
|
(65,576)
|
|
|
(6,518)
|
|
Income (loss) before
income taxes
|
446,333
|
|
|
(79,778)
|
|
Income tax
provision
|
98,119
|
|
|
6,580
|
|
Net income
(loss)
|
$
|
348,214
|
|
|
$
|
(86,358)
|
|
|
|
|
|
Earnings (loss) per
common share:
|
|
|
|
Basic
|
$2.13
|
|
|
$(0.92)
|
|
Diluted
|
$2.03
|
|
|
$(0.92)
|
|
Weighted-average
common shares outstanding:
|
|
|
|
Basic
|
163,141
|
|
|
94,207
|
|
Diluted
|
171,194
|
|
|
94,207
|
|
_________________________________
|
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 statements of operations from that
date forward. Additionally, the Company has modified the
presentation of its consolidated condensed statements of operations
for the three and nine months ended September 30, 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)
|
|
|
Nine Months
Ended September 30,
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
|
348,214
|
|
|
$
|
(86,358)
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and amortization
|
107,919
|
|
|
28,668
|
|
Lease
amortization expense
|
45,996
|
|
|
24,293
|
|
Amortization of debt issuance costs
|
4,042
|
|
|
3,024
|
|
Debt
discount amortization
|
10,255
|
|
|
3,857
|
|
Impairment loss
|
—
|
|
|
174,269
|
|
Deferred
taxes, net
|
86,982
|
|
|
(117)
|
|
Non-cash
share-based compensation
|
27,113
|
|
|
8,066
|
|
Loss on
disposal of long-lived assets
|
194
|
|
|
297
|
|
Gain on
Topgolf investment
|
(252,531)
|
|
|
—
|
|
Gain on
conversion of note receivable
|
—
|
|
|
(1,252)
|
|
Unrealized net gains on hedging instruments and foreign
currency
|
(2,659)
|
|
|
(8,899)
|
|
Acquisition costs
|
(16,199)
|
|
|
—
|
|
Changes in assets and
liabilities
|
(112,522)
|
|
|
(23,297)
|
|
Net cash provided by
operating activities
|
246,804
|
|
|
122,551
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Cash acquired in
merger
|
171,294
|
|
|
—
|
|
Capital
expenditures
|
(198,896)
|
|
|
(30,911)
|
|
Investment in
golf-related ventures
|
—
|
|
|
(19,999)
|
|
Proceeds from sale of
investment in golf-related ventures
|
18,591
|
|
|
—
|
|
Proceeds from sale of
property and equipment
|
—
|
|
|
8
|
|
Net cash used in
investing activities
|
(9,011)
|
|
|
(50,902)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Repayments of
long-term debt
|
(160,860)
|
|
|
(8,203)
|
|
Proceeds from issuance
of long-term debt
|
20,000
|
|
|
37,728
|
|
Proceeds from
(repayments of) credit facilities, net
|
7,978
|
|
|
(114,345)
|
|
Proceeds from issuance
of convertible notes
|
—
|
|
|
258,750
|
|
Premium paid for
capped call confirmations
|
—
|
|
|
(31,775)
|
|
Debt issuance
cost
|
(5,441)
|
|
|
(9,143)
|
|
Payment on contingent
earn-out obligation
|
(3,577)
|
|
|
—
|
|
Repayments of
financing leases
|
(465)
|
|
|
(530)
|
|
Proceeds from lease
financing
|
49,508
|
|
|
—
|
|
Exercise of stock
options
|
19,520
|
|
|
130
|
|
Dividends
paid
|
(3)
|
|
|
(1,891)
|
|
Acquisition of
treasury stock
|
(12,938)
|
|
|
(22,143)
|
|
Net cash (used in)
provided by financing activities
|
(86,278)
|
|
|
108,578
|
|
Effect of exchange
rate changes on cash, cash equivalents and restricted
cash
|
(3,775)
|
|
|
(237)
|
|
Net increase in cash,
cash equivalents and restricted cash
|
147,740
|
|
|
179,990
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
366,119
|
|
|
106,666
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
513,859
|
|
|
$
|
286,656
|
|
CALLAWAY GOLF
COMPANY
|
Consolidated Net
Sales and Operating Segment Information
|
(Unaudited)
|
(In
thousands)
|
|
|
|
Net Revenues by
Product Category(2)
|
|
|
Three Months
Ended September 30,
|
|
Growth
|
|
Non-GAAP Constant Currency vs.
2020(1)
|
|
|
2021
|
|
2020
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
Venues
|
|
$
|
313,640
|
|
|
$
|
—
|
|
|
$
|
313,640
|
|
|
n/a
|
|
n/a
|
Topgolf other business
lines
|
|
20,143
|
|
|
—
|
|
|
20,143
|
|
|
n/a
|
|
n/a
|
Golf clubs
|
|
229,346
|
|
|
209,356
|
|
|
19,990
|
|
|
9.5%
|
|
9.1%
|
Golf balls
|
|
60,269
|
|
|
57,921
|
|
|
2,348
|
|
|
4.1%
|
|
3.4%
|
Apparel
|
|
150,240
|
|
|
125,609
|
|
|
24,631
|
|
|
19.6%
|
|
18.5%
|
Gear and
other
|
|
82,823
|
|
|
82,673
|
|
|
150
|
|
|
0.2%
|
|
-0.1%
|
Total net
revenues
|
|
$
|
856,461
|
|
|
$
|
475,559
|
|
|
$
|
380,902
|
|
|
80.1%
|
|
79.2%
|
|
|
|
|
|
|
|
|
|
|
|
(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 2021 were expanded to include Topgolf's
revenue categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues
by Region
|
|
|
Three Months
Ended September 30,
|
|
Growth
|
|
Non-GAAP Constant Currency vs.
2020(1)
|
|
|
2021
|
|
2020
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
552,895
|
|
|
$
|
214,619
|
|
|
$
|
338,276
|
|
|
157.6%
|
|
157.6%
|
Europe
|
|
157,215
|
|
|
134,680
|
|
|
22,535
|
|
|
16.7%
|
|
14.2%
|
Japan
|
|
63,441
|
|
|
56,530
|
|
|
6,911
|
|
|
12.2%
|
|
16.5%
|
Rest of
world
|
|
82,910
|
|
|
69,730
|
|
|
13,180
|
|
|
18.9%
|
|
14.5%
|
Total net
revenues
|
|
$
|
856,461
|
|
|
$
|
475,559
|
|
|
$
|
380,902
|
|
|
80.1%
|
|
79.2%
|
|
|
|
|
|
|
|
|
|
|
|
(1) Calculated by applying 2020
exchange rates to 2021 reported sales in regions outside the
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
Information
|
|
|
Three Months
Ended September 30,
|
|
Growth
|
|
Non-GAAP Constant Currency vs.
2020(1)
|
|
|
2021
|
|
2020
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
Topgolf
|
|
$
|
333,783
|
|
|
$
|
—
|
|
|
$
|
333,783
|
|
|
n/a
|
|
n/a
|
Golf
equipment
|
|
289,615
|
|
|
267,277
|
|
|
22,338
|
|
|
8.4%
|
|
7.9%
|
Apparel, gear and
other
|
|
233,063
|
|
|
208,282
|
|
|
24,781
|
|
|
11.9%
|
|
11.1%
|
Total net
revenues
|
|
$
|
856,461
|
|
|
$
|
475,559
|
|
|
$
|
380,902
|
|
|
80.1%
|
|
79.2%
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
|
|
|
|
|
|
|
Topgolf
|
|
$
|
23,928
|
|
|
$
|
—
|
|
|
$
|
23,928
|
|
|
n/a
|
|
|
Golf
equipment
|
|
45,815
|
|
|
56,784
|
|
|
(10,969)
|
|
|
-19.3%
|
|
|
Apparel, gear and
other
|
|
34,634
|
|
|
25,909
|
|
|
8,725
|
|
|
33.7%
|
|
|
Total segment
operating income
|
|
104,377
|
|
|
82,693
|
|
|
21,684
|
|
|
26.2%
|
|
|
Corporate G&A and
other(2)
|
|
(28,367)
|
|
|
(19,184)
|
|
|
(9,183)
|
|
|
47.9%
|
|
|
Total operating
income
|
|
76,010
|
|
|
63,509
|
|
|
12,501
|
|
|
19.7%
|
|
|
Interest expense,
net
|
|
(28,730)
|
|
|
(12,727)
|
|
|
(16,003)
|
|
|
125.7%
|
|
|
Other income,
net
|
|
2,958
|
|
|
7,010
|
|
|
(4,052)
|
|
|
-57.8%
|
|
|
Total income before
income taxes
|
|
$
|
50,238
|
|
|
$
|
57,792
|
|
|
$
|
(7,554)
|
|
|
-13.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 (i) $1.4
million of transaction, transition and other non-recurring costs
associated with the merger with Topgolf completed on March 8, 2021;
(ii) $5.4 million of non-cash amortization expense for intangible
assets acquired in connection with the merger with Topgolf,
combined with depreciation expense from the fair value step-up of
Topgolf property, plant and equipment and amortization expense
related to the fair value adjustments to Topgolf leases; and (iii)
$0.5 million of costs related to the implementation of new IT
systems for Jack Wolfskin. The amount for the third quarter of 2020
includes (i) $2.3 million of non-recurring costs associated with
the Company's transition to the new North America Distribution
Center; (ii) $1.5 million of professional and legal fees associated
with the acquisition of Topgolf; (iii) $0.5 million of costs
related to the implementation of new IT systems for Jack
Wolfskin; and (iv) $0.7 million of cost reductions
initiatives, including severance charges associated with workforce
reductions due to the COVID-19 pandemic.
|
CALLAWAY GOLF
COMPANY
|
Consolidated Net
Sales and Operating Segment Information
|
(Unaudited)
|
(In
thousands)
|
|
|
|
Net Revenues by
Product Category(2)
|
|
|
Nine Months
Ended September 30,
|
|
Growth
|
|
Non-GAAP Constant Currency vs.
2020(1)
|
|
|
2021
|
|
2020
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
Venues
|
|
$
|
702,234
|
|
|
$
|
—
|
|
|
$
|
702,234
|
|
|
n/a
|
|
n/a
|
Topgolf other business
lines
|
|
49,639
|
|
|
—
|
|
|
49,639
|
|
|
n/a
|
|
n/a
|
Golf clubs
|
|
865,671
|
|
|
616,620
|
|
|
249,051
|
|
|
40.4%
|
|
37.7%
|
Golf balls
|
|
202,085
|
|
|
152,261
|
|
|
49,824
|
|
|
32.7%
|
|
30.2%
|
Apparel
|
|
336,942
|
|
|
239,201
|
|
|
97,741
|
|
|
40.9%
|
|
37.4%
|
Gear and
other
|
|
265,152
|
|
|
206,749
|
|
|
58,403
|
|
|
28.2%
|
|
25.1%
|
Total net
revenues
|
|
$
|
2,421,723
|
|
|
$
|
1,214,831
|
|
|
$
|
1,206,892
|
|
|
99.3%
|
|
96.1%
|
|
|
|
|
|
|
|
|
|
|
|
(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 2021 were expanded to include Topgolf's
revenue categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues
by Region
|
|
|
Nine Months
Ended September 30,
|
|
Growth
|
|
Non-GAAP Constant Currency vs.
2020(1)
|
|
|
2021
|
|
2020
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
1,583,874
|
|
|
$
|
603,836
|
|
|
$
|
980,038
|
|
|
162.3%
|
|
162.3%
|
Europe
|
|
386,559
|
|
|
281,473
|
|
|
105,086
|
|
|
37.3%
|
|
29.0%
|
Japan
|
|
197,188
|
|
|
158,517
|
|
|
38,671
|
|
|
24.4%
|
|
25.5%
|
Rest of
world
|
|
254,102
|
|
|
171,005
|
|
|
83,097
|
|
|
48.6%
|
|
38.6%
|
Total net
revenues
|
|
$
|
2,421,723
|
|
|
$
|
1,214,831
|
|
|
$
|
1,206,892
|
|
|
99.3%
|
|
96.1%
|
|
|
|
|
|
|
|
|
|
|
|
(1) Calculated by applying 2020
exchange rates to 2021 reported sales in regions outside the
U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Segment
Information
|
|
|
Nine Months
Ended September 30,
|
|
Growth
|
|
Non-GAAP Constant Currency vs.
2020(1)
|
|
|
2021
|
|
2020
|
|
Dollars
|
|
Percent
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
Topgolf
|
|
$
|
751,873
|
|
|
$
|
—
|
|
|
$
|
751,873
|
|
|
n/a
|
|
n/a
|
Golf
equipment
|
|
1,067,756
|
|
|
768,881
|
|
|
298,875
|
|
|
38.9%
|
|
36.2%
|
Apparel, gear and
other
|
|
602,094
|
|
|
445,950
|
|
|
156,144
|
|
|
35.0%
|
|
31.7%
|
Total net
revenues
|
|
$
|
2,421,723
|
|
|
$
|
1,214,831
|
|
|
$
|
1,206,892
|
|
|
99.3%
|
|
96.1%
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
|
|
|
|
|
|
|
Topgolf
|
|
$
|
52,086
|
|
|
$
|
—
|
|
|
$
|
52,086
|
|
|
n/a
|
|
|
Golf
equipment
|
|
228,825
|
|
|
144,585
|
|
|
84,240
|
|
|
58.3%
|
|
|
Apparel, gear and
other
|
|
70,792
|
|
|
10,399
|
|
|
60,393
|
|
|
580.8%
|
|
|
Total segment
operating income
|
|
351,703
|
|
|
154,984
|
|
|
196,719
|
|
|
126.9%
|
|
|
Corporate G&A and
other(2)
|
|
(92,325)
|
|
|
(53,975)
|
|
|
(38,350)
|
|
|
71.1%
|
|
|
Goodwill and tradename
impairment(3)
|
|
—
|
|
|
(174,269)
|
|
|
174,269
|
|
|
-100.0%
|
|
|
Total operating
income (loss)
|
|
259,378
|
|
|
(73,260)
|
|
|
332,638
|
|
|
454.1%
|
|
|
Gain on Topgolf
investment(4)
|
|
252,531
|
|
|
—
|
|
|
252,531
|
|
|
n/a
|
|
|
Interest expense,
net
|
|
(75,063)
|
|
|
(34,005)
|
|
|
(41,058)
|
|
|
120.7%
|
|
|
Other income,
net
|
|
9,487
|
|
|
27,487
|
|
|
(18,000)
|
|
|
-65.5%
|
|
|
Total income (loss)
before income taxes
|
|
$
|
446,333
|
|
|
$
|
(79,778)
|
|
|
$
|
526,111
|
|
|
659.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 (i) $20.1
million of transaction, transition and other non-recurring costs
associated with the merger with Topgolf completed on March 8, 2021,
(ii) $13.9 million of non-cash amortization expense for intangible
assets acquired in connection with the merger with Topgolf,
combined with depreciation expense from the fair value step-up of
Topgolf property, plant and equipment and amortization
expense related to the fair value adjustments to Topgolf leases,
and (iii) $2.0 million of costs related to the implementation of
new IT systems for Jack Wolfskin. The amount for 2020 also includes
certain non-recurring costs, including (i) $5.3 million of costs
associated with the Company's transition to its new North America
Distribution Center; (ii) $1.5m of professional fees and legal
expenses associated with the acquisition of Topgolf; (iii) $0.9
million related to the implementation of new IT systems for Jack
Wolfskin, and (iv) $4.8 million related to cost-reduction
initiatives, including severance charges associated with workforce
reductions due to the COVID-19 pandemic.
|
(3) Represents an impairment charge
related to Jack Wolfskin recognized in the second quarter of
2020.
|
(4) 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 September 30,
|
|
Growth
|
|
Nine Months
Ended September 30,
|
|
Growth
|
|
|
2021
|
|
2019
|
|
Dollars
|
|
Percent
|
|
2021
|
|
2019
|
|
Dollars
|
|
Percent
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Topgolf
|
|
$
|
333,783
|
|
|
$
|
—
|
|
|
$
|
333,783
|
|
|
n/a
|
|
$
|
751,873
|
|
|
$
|
—
|
|
|
$
|
751,873
|
|
|
n/a
|
Golf
equipment
|
|
289,615
|
|
|
210,502
|
|
|
79,113
|
|
|
37.6%
|
|
1,067,756
|
|
|
826,474
|
|
|
241,282
|
|
|
29.2%
|
Apparel, gear and
other
|
|
233,063
|
|
|
215,715
|
|
|
17,348
|
|
|
8.0%
|
|
602,094
|
|
|
562,648
|
|
|
39,446
|
|
|
7.0%
|
Total net
revenues
|
|
$
|
856,461
|
|
|
$
|
426,217
|
|
|
$
|
430,244
|
|
|
100.9%
|
|
$
|
2,421,723
|
|
|
$
|
1,389,122
|
|
|
$
|
1,032,601
|
|
|
74.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Topgolf
|
|
$
|
23,928
|
|
|
$
|
—
|
|
|
$
|
23,928
|
|
|
n/a
|
|
$
|
52,086
|
|
|
$
|
—
|
|
|
$
|
52,086
|
|
|
n/a
|
Golf
equipment
|
|
45,815
|
|
|
23,124
|
|
|
22,691
|
|
|
98.1%
|
|
228,825
|
|
|
148,782
|
|
|
80,043
|
|
|
53.8%
|
Apparel, gear and
other
|
|
34,634
|
|
|
34,877
|
|
|
(243)
|
|
|
-0.7%
|
|
70,792
|
|
|
68,909
|
|
|
1,883
|
|
|
2.7%
|
Total segment
operating income
|
|
104,377
|
|
|
58,001
|
|
|
46,376
|
|
|
80.0%
|
|
351,703
|
|
|
217,691
|
|
|
134,012
|
|
|
61.6%
|
Corporate G&A and
other(1)
|
|
(28,367)
|
|
|
(17,512)
|
|
|
(10,855)
|
|
|
62.0%
|
|
(92,325)
|
|
|
(62,367)
|
|
|
(29,958)
|
|
|
48.0%
|
Total operating
income
|
|
76,010
|
|
|
40,489
|
|
|
35,521
|
|
|
87.7%
|
|
259,378
|
|
|
155,324
|
|
|
104,054
|
|
|
67.0%
|
Gain on Topgolf
investment(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
n/a
|
|
252,531
|
|
|
—
|
|
|
252,531
|
|
|
n/a
|
Interest expense,
net
|
|
(28,730)
|
|
|
(9,545)
|
|
|
(19,185)
|
|
|
201.0%
|
|
(75,063)
|
|
|
(29,444)
|
|
|
(45,619)
|
|
|
154.9%
|
Other income,
net
|
|
2,958
|
|
|
2,232
|
|
|
726
|
|
|
32.5%
|
|
9,487
|
|
|
1,459
|
|
|
8,028
|
|
|
550.2%
|
Total income before
income taxes
|
|
$
|
50,238
|
|
|
$
|
33,176
|
|
|
$
|
17,062
|
|
|
51.4%
|
|
$
|
446,333
|
|
|
$
|
127,339
|
|
|
$
|
318,994
|
|
|
250.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 the three and nine months
ended September 30, 2021 includes (i) $1.4 million and $20.1
million, respectively, of transaction, transition and other
non-recurring costs associated with the merger with Topgolf
completed on March 8, 2021; (ii) $5.4 million and $13.9 million,
respectively, of non-cash amortization expense for intangible
assets acquired in connection with the merger with Topgolf,
combined with depreciation expense from the fair value step-up of
Topgolf property, plant and equipment and amortization
expense related to the fair value adjustments to Topgolf leases;
and (iii) $0.5 million and $2.0 million, respectively, of costs
related to the implementation of new IT systems for Jack Wolfskin.
The amount for the three and nine months ended September 30, 2019
also includes $3.0 million and $13.2 million, respectively, of
non-recurring transaction fees and transition costs associated with
the acquisition of Jack Wolfskin completed in January 2019, as well
as other non-recurring advisory fees.
|
(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
September 30,
|
|
2021
|
|
2020
|
|
GAAP
|
|
Non-Cash
Amortization
and
Depreciation(1)
|
|
Non-Cash
Amortization
of Discount
on
Convertible
Notes(2)
|
|
Acquisition
& Other
Non-
Recurring
Items(3)
|
|
Tax
Valuation
Allowance(4)
|
|
Non- GAAP(5)
|
|
GAAP
|
|
Non-Cash
Amortization(1)
|
|
Non-Cash
Amortization
of Discount
on
Convertible
Notes(2)
|
|
Other Non-
Recurring
Items(3)
|
|
Non-GAAP
|
Net
revenues
|
$
|
856,461
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
856,461
|
|
|
$
|
475,559
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
475,559
|
|
Total costs and
expenses
|
780,451
|
|
|
6,654
|
|
|
—
|
|
|
1,875
|
|
|
—
|
|
|
771,922
|
|
|
412,050
|
|
|
1,235
|
|
|
—
|
|
|
5,088
|
|
|
405,727
|
|
Income (loss) from
operations
|
76,010
|
|
|
(6,654)
|
|
|
—
|
|
|
(1,875)
|
|
|
—
|
|
|
84,539
|
|
|
63,509
|
|
|
(1,235)
|
|
|
—
|
|
|
(5,088)
|
|
|
69,832
|
|
Other
income/(expense), net
|
(25,772)
|
|
|
(941)
|
|
|
(2,663)
|
|
|
(306)
|
|
|
—
|
|
|
(21,862)
|
|
|
(5,717)
|
|
|
—
|
|
|
(2,415)
|
|
|
—
|
|
|
(3,302)
|
|
Income tax provision
(benefit)
|
66,229
|
|
|
(1,823)
|
|
|
(639)
|
|
|
(523)
|
|
|
32,799
|
|
|
36,415
|
|
|
5,360
|
|
|
(284)
|
|
|
(555)
|
|
|
(1,170)
|
|
|
7,369
|
|
Net income
(loss)
|
$
|
(15,991)
|
|
|
$
|
(5,772)
|
|
|
$
|
(2,024)
|
|
|
$
|
(1,658)
|
|
|
$
|
(32,799)
|
|
|
$
|
26,262
|
|
|
$
|
52,432
|
|
|
$
|
(951)
|
|
|
$
|
(1,860)
|
|
|
$
|
(3,918)
|
|
|
$
|
59,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share:
|
$
|
(0.09)
|
|
|
$
|
(0.03)
|
|
|
$
|
(0.01)
|
|
|
$
|
(0.01)
|
|
|
$
|
(0.18)
|
|
|
$
|
0.14
|
|
|
$
|
0.54
|
|
|
$
|
(0.01)
|
|
|
$
|
(0.02)
|
|
|
$
|
(0.04)
|
|
|
$
|
0.61
|
|
Diluted
weighted-average shares outstanding:
|
185,963
|
|
|
185,963
|
|
|
185,963
|
|
|
185,963
|
|
|
185,963
|
|
|
193,925
|
|
|
96,612
|
|
|
96,612
|
|
|
96,612
|
|
|
96,612
|
|
|
96,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents non-cash amortization
expense of intangible assets 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 amortization 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) In 2021, non-recurring costs
include transition costs associated with the Topgolf merger and
costs related to the implementation of new IT systems for Jack
Wolfskin. In 2020, non-recurring costs include costs associated
with the Company's transition to its new North America Distribution
Center, costs associated with the acquisition of Topgolf,
implementation of new IT systems for Jack Wolfskin, and severance
related to the Company's cost reduction initiatives.
|
(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.
|
(5)
Non-GAAP diluted earnings per share for the three months
ended September 30, 2021 was calculated using the diluted weighted
average outstanding shares, as earnings on a non-GAAP basis
resulted in net income after giving effect to pro forma
adjustments.
|
CALLAWAY GOLF
COMPANY
|
Supplemental
Financial Information and Non-GAAP Reconciliation
|
(Unaudited)
|
(In
thousands)
|
|
|
Nine Months Ended
September 30,
|
|
2021
|
|
2020
|
|
GAAP
|
|
Non-Cash
Amortization
and
Depreciation(1)
|
|
Non-Cash
Amortization
of Discount
on
Convertible
Notes(2)
|
|
Acquisition
& Other Non-
Recurring
Items(3)
|
|
Tax
Valuation
Allowance(4)
|
|
Non- GAAP
|
|
GAAP
|
|
Non-Cash
Amortization
and
Impairment Charges(1)
|
|
Non-Cash
Amortization
of Discount
on
Convertible
Notes(2)
|
|
Other Non-
Recurring
Items(3)
|
|
Non- GAAP(5)
|
Net
revenues
|
$
|
2,421,723
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,421,723
|
|
|
$
|
1,214,831
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,214,831
|
|
Total costs and
expenses
|
2,162,345
|
|
|
17,620
|
|
|
—
|
|
|
22,086
|
|
|
—
|
|
|
2,122,639
|
|
|
1,288,091
|
|
|
177,861
|
|
|
—
|
|
|
12,526
|
|
|
1,097,704
|
|
Income (loss) from
operations
|
259,378
|
|
|
(17,620)
|
|
|
—
|
|
|
(22,086)
|
|
|
—
|
|
|
299,084
|
|
|
(73,260)
|
|
|
(177,861)
|
|
|
—
|
|
|
(12,526)
|
|
|
117,127
|
|
Other
income/(expense), net
|
186,955
|
|
|
(2,693)
|
|
|
(7,796)
|
|
|
251,820
|
|
|
—
|
|
|
(54,376)
|
|
|
(6,518)
|
|
|
—
|
|
|
(3,914)
|
|
|
—
|
|
|
(2,604)
|
|
Income tax provision
(benefit)
|
98,119
|
|
|
(4,875)
|
|
|
(1,871)
|
|
|
(5,471)
|
|
|
38,983
|
|
|
71,353
|
|
|
6,580
|
|
|
(8,750)
|
|
|
(900)
|
|
|
(2,881)
|
|
|
19,111
|
|
Net income
(loss)
|
$
|
348,214
|
|
|
$
|
(15,438)
|
|
|
$
|
(5,925)
|
|
|
$
|
235,205
|
|
|
$
|
(38,983)
|
|
|
$
|
173,355
|
|
|
$
|
(86,358)
|
|
|
$
|
(169,111)
|
|
|
$
|
(3,014)
|
|
|
$
|
(9,645)
|
|
|
$
|
95,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share:
|
$
|
2.03
|
|
|
$
|
(0.09)
|
|
|
$
|
(0.03)
|
|
|
$
|
1.37
|
|
|
$
|
(0.23)
|
|
|
$
|
1.01
|
|
|
$
|
(0.92)
|
|
|
$
|
(1.80)
|
|
|
$
|
(0.03)
|
|
|
$
|
(0.10)
|
|
|
$
|
0.99
|
|
Diluted
weighted-average shares outstanding:
|
171,194
|
|
|
171,194
|
|
|
171,194
|
|
|
171,194
|
|
|
171,194
|
|
|
171,194
|
|
|
94,207
|
|
|
94,207
|
|
|
94,207
|
|
|
94,207
|
|
|
96,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents non-cash amortization
expense of intangible assets 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 amortization expense related to the fair value
adjustments to Topgolf leases and Topgolf debt, all recorded in
connection with the Topgolf merger. Additionally, in 2020 there was
an impairment charge of $174.3 million related to Jack
Wolfskin.
|
(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 items in 2021 includes transaction, transition and
other non-recurring 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 costs associated with the Company's
transition to its new North America Distribution Center, costs
associated with the acquisition of Topgolf, implementation costs
related to new IT systems for Jack Wolfskin, and severance charges
associated with workforce reductions due to the COVID-19
pandemic.
|
(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.
|
(5)
Non-GAAP diluted earnings per share for the nine months ended
September 30, 2020 was calculated using the diluted weighted
average outstanding shares, as earnings on a non-GAAP basis
resulted in net income after giving effect to pro forma
adjustments.
|
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
|
|
December
31,
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
|
|
December
31,
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
|
|
2020
|
|
2021
|
|
2021
|
|
2021
|
|
Total
|
|
2019
|
|
2020
|
|
2020
|
|
2020
|
|
Total
|
Net income
(loss)
|
$
|
(40,576)
|
|
|
$
|
272,461
|
|
|
$
|
91,744
|
|
|
$
|
(15,991)
|
|
|
$
|
307,638
|
|
|
$
|
(29,218)
|
|
|
$
|
28,894
|
|
|
$
|
(167,684)
|
|
|
$
|
52,432
|
|
|
$
|
(115,576)
|
|
Interest expense,
net
|
12,927
|
|
|
17,457
|
|
|
28,876
|
|
|
28,730
|
|
|
87,990
|
|
|
9,049
|
|
|
9,115
|
|
|
12,163
|
|
|
12,727
|
|
|
43,054
|
|
Income tax provision
(benefit)
|
(7,124)
|
|
|
47,743
|
|
|
(15,853)
|
|
|
66,229
|
|
|
90,995
|
|
|
(2,352)
|
|
|
9,151
|
|
|
(7,931)
|
|
|
5,360
|
|
|
4,228
|
|
Depreciation and
amortization expense
|
10,840
|
|
|
20,272
|
|
|
43,270
|
|
|
44,377
|
|
|
118,759
|
|
|
9,480
|
|
|
8,997
|
|
|
9,360
|
|
|
10,311
|
|
|
38,148
|
|
JW goodwill and trade
name impairment(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
174,269
|
|
|
—
|
|
|
174,269
|
|
Non-cash stock
compensation and stock warrant expense, net
|
2,861
|
|
|
4,609
|
|
|
11,039
|
|
|
10,832
|
|
|
29,341
|
|
|
3,418
|
|
|
1,861
|
|
|
2,942
|
|
|
3,263
|
|
|
11,484
|
|
Non-cash lease
amortization expense
|
(76)
|
|
|
872
|
|
|
2,103
|
|
|
2,792
|
|
|
5,691
|
|
|
(120)
|
|
|
264
|
|
|
207
|
|
|
(99)
|
|
|
252
|
|
Acquisitions &
other non-recurring costs, before taxes(2)
|
8,607
|
|
|
(235,594)
|
|
|
3,274
|
|
|
1,875
|
|
|
(221,838)
|
|
|
4,090
|
|
|
1,516
|
|
|
5,856
|
|
|
4,402
|
|
|
15,864
|
|
Adjusted
EBITDA
|
$
|
(12,541)
|
|
|
$
|
127,820
|
|
|
$
|
164,453
|
|
|
$
|
138,844
|
|
|
$
|
418,576
|
|
|
$
|
(5,653)
|
|
|
$
|
59,798
|
|
|
$
|
29,182
|
|
|
$
|
88,396
|
|
|
$
|
171,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) In 2020, amounts include an
impairment charge of $174.3 million related to Jack
Wolfskin.
|
(2) In 2021, amounts include
transaction, transition and other non-recurring 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, costs associated with the acquisition of
Topgolf, and the implementation of new IT systems for Jack
Wolfskin, as well as severance related to the Company's cost
reduction initiatives.
|
CALLAWAY GOLF
COMPANY
|
Non-GAAP
Reconciliation and Supplemental Financial
Information
|
(Unaudited)
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Trailing
Twelve Month Adjusted EBITDA
|
|
Quarter
Ended
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
December
31,
|
|
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
|
Total
|
Net income
(loss)
|
$
|
48,647
|
|
|
$
|
28,931
|
|
|
$
|
31,048
|
|
|
$
|
(29,218)
|
|
|
$
|
79,408
|
|
Interest expense,
net
|
9,639
|
|
|
10,260
|
|
|
9,545
|
|
|
9,049
|
|
|
38,493
|
|
Income tax provision
(benefit)
|
9,556
|
|
|
7,208
|
|
|
2,128
|
|
|
(2,352)
|
|
|
16,540
|
|
Depreciation and
amortization expense
|
7,977
|
|
|
9,022
|
|
|
8,472
|
|
|
9,480
|
|
|
34,951
|
|
Non-cash stock
compensation expense
|
3,435
|
|
|
3,530
|
|
|
2,513
|
|
|
3,418
|
|
|
12,896
|
|
Non-cash lease
amortization expense
|
(140)
|
|
|
(9)
|
|
|
(36)
|
|
|
(120)
|
|
|
(305)
|
|
Acquisitions &
other non-recurring costs, before taxes(1)
|
13,986
|
|
|
6,939
|
|
|
3,009
|
|
|
4,090
|
|
|
28,024
|
|
Adjusted
EBITDA
|
$
|
93,100
|
|
|
$
|
65,881
|
|
|
$
|
56,679
|
|
|
$
|
(5,653)
|
|
|
$
|
210,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Acquisitions and other
non-recurring costs for the year ended December 31, 2019, include
(i) $14.1 million of transaction and transition related costs
associated with the acquisition of Jack Wolfskin, including
banker's fees, legal fees, consulting fees, audit fees for SEC
reporting requirements, valuation services associated with
preparing Jack Wolfskin's opening balance sheet and travel
expenses; (ii) 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 (iii) consulting fees to address an
activist investor. These amounts exclude any depreciation or
amortization, which has been presented in a separate line
above.
|
CALLAWAY GOLF
COMPANY
|
2021 Adjusted
EBITDA Guidance GAAP to Non-GAAP Reconciliation
|
(Unaudited)
|
(In
millions)
|
|
|
Twelve Months
Ended
December 31, 2021
|
|
|
Net income
|
$271 -
$276
|
|
|
Adjusted
EBITDA(1)
|
$424 -
$430
|
|
|
|
|
(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 and Topgolf. A
forecast of each of these line items is not available without
unreasonable efforts due to the variability 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.
|
CALLAWAY GOLF
COMPANY
|
2021 Topgolf
Adjusted EBITDA Guidance GAAP to Non-GAAP
Reconciliation
|
(Unaudited)
|
(In
millions)
|
|
|
Twelve
Months Ended
|
|
|
|
December 31,
2021(1)
|
|
Topgolf segment
income from operations(2)
|
|
$
|
43
|
|
|
|
|
|
|
Topgolf Adjusted
EBITDA(3)
|
|
$
|
158
|
|
|
|
|
|
|
|
|
|
|
(1) Due to
the timing of the Topgolf acquisition on March 8, 2021, Callaway's
reported financial results for the twelve months ended December 31,
2021 will only include 10 months of Topgolf results in
2021.
|
(2) The
Company does not forecast GAAP net income at the subsidiary level,
but has provided Topgolf's forecasted segment income from
operations as a relevant measurement of profitability. Segment
income from operations does not include corporate general and
administrative expenses not utilized by management in determining
segment profitability, including non-cash amortization, interest
expense and taxes as well as other non-cash and non-recurring
items.
|
(3)
Topgolf forecasted Adjusted EBITDA excludes the following
from forecasted segment income from operation: depreciation
expense, non-cash stock compensation expense and non-cash lease
amortization expense. A forecast of each of these line items is not
available without unreasonable efforts due to the variability of
these items and the inability to predict them with certainty.
Accordingly, we have not provided a further reconciliation of
Topgolf Adjusted EBITDA to Segment income from
operations.
|
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SOURCE Callaway Golf Company