Callaway Golf Company · NYSE:CALY
Callaway Golf — Topgolf Callaway Brands — Q4 2023 Earnings Presentation
36 slides from Callaway Golf's earnings presentation, Feb 13, 2024
Slide 1: Fourth Quarter 2023 Earnings Conference Call
Topgolf Callaway Brands Corp. Fourth Quarter 2023 Earnings Conference Call February 13, 2024
Slide 2: Important Notices
IMPORTANT NOTICES Forward-looking Statements. During the presentation, any comments made about future plans, events, financial results, performance, prospects, or growth opportunities, including statements relating to the Company’s financial outlook (including, among others, net revenues, same venue
Slide 3: FY 2023 Highlights
Consolidated full year revenue growth of 7%. $221 million of Embedded Cash Flow.1 Topgolf delivered 1% Same Venue Sales growth in 2023 FY 2023 and inflects to positive Free Cash Flow. HIGHLIGHTS Callaway maintained strong U.S. market share in 2023 including #1 in Total Clubs, Woods, Drivers, Fairway
Slide 4: 2023 Golf Stats Show No Sign of Slowdown
2023 GOLF STATS SHOW NO SIGN OF SLOWDOWN 1 1 MODERN GOLF ECOSYSTEM NOTEWORTHY 2023 STATS1 ▪ Total on and off course golfers 45M, up 9% YoY and up 32% vs. 2019 32.9M 26.6M Total Off-Course Total On-Course 18.5M 14.4M 12.1M ▪ ~26.6M Americans played golf on course, up 1M YoY Off-Course Only Both On/Of
Slide 5: Q4 2023 & FY 2023 Segment Highlights
Q4 Q42023 & FYSEGMENT HIGHLIGHTS 2023 SEGMENT HIGHLIGHTS Concluded the rollout TOPGOLF of PIE now PIE in U.S. inventory all golf venues consumer U.S. Newrounds except played in 2023 Venues Venue-level Adjusted management system 2023 +4%strongly year-over- EBITDAR margins remains strong and opened La
Slide 6: Recent Brand Highlights
RECENT BRAND HIGHLIGHTS TOPGOLF GOLF EQUIPMENT ACTIVE LIFESTYLE PAT MCAFEE IN SHOW MOLLY SIMS: FIRST EVER AI SMOKE LAUNCH EVENT AT ACTIVATION & PARTNERSHIP: 2 TRAVISMATHEW WOMEN’S TOPGOLF EL SEGUNDO WEEK PRE-SUPER BOWL RUN AMBASSADOR [] 6
Slide 7: Callaway Product Launches
NEW PRODUCTS REFLECT R&D LEADERSHIP • The Ai Smoke Family features an industry-first Ai Smart Face. This revolutionary design uses swing dynamics from thousands of golfers and advanced machine 2024 learning to create multiple sweet spots across the face. CALLAWAY • The Chrome Golf Ball Family is the
Slide 8: Q4 & FY 2023 Financial Results
Q4 & FY 2023 FINANCIAL RESULTS Q4 2023 NON-GAAP RESULTS1 FY 2023 NON-GAAP RESULTS1 ($ in millions, except per share data) ($ in millions, except per share data) Q4 2023 Q4 2022 Change (%) FY 2023 FY 2022 Change (%) Net Revenues $897.1 $851.3 5.4% Net Revenues $4,284.8 $3,995.7 7.2% Adjusted EBITDA $
Slide 9: Same Venue Sales Growth
SAME VENUE SALES GROWTH TOPGOLF 2-YEAR STACKED SVS1 Consumer Business (1-2 Bay Walk-In, Reservations & Events) Consistently up high single digits vs 2019 levels Corporate Business (3+ Bay Events) Volatility related to a post-COVID surge in corporate events Trends have stabilized the past two quarter
Slide 10: Key Liquidity Metrics
KEY LIQUIDITY METRICS Metric1 As of Dec 31, As of Dec 31, Metric1 As of Dec 31, As of Dec 31, ($ in millions) 2023 2022 ($ in millions) 2023 2022 Cash and Cash Equivalents $394 $180 Gross Capital Expenditures3 $482 $532 Inventory $794 $959 Net Capital Expenditures $205 $357 Non-Growth Capital Availa
Slide 11: 2024 Total Company Outlook
2024 TOTAL COMPANY OUTLOOK FULL YEAR 20241 Q1 20241 Current FY 2024 FY 2023 ($ in millions) Q1 2024 Q1 2023 ($ in millions) Guidance Results Guidance Results Net Revenue $4,515 - $4,555 $4,285 Net Revenue $1,140 - $1,160 $1,167 Adjusted EBITDA $620 - $640 $597 Adjusted EBITDA $130 - $140 $157 Non-GA
Slide 12: Topgolf Key Metrics & Outlook
TOPGOLF KEY METRICS & OUTLOOK ($ in millions) Q4 20231 Q4 20221 FY 20231 FY 2022 2024 Outlook Net Revenue $439 $410 $1,761 $1,549 ~$1,960 Income from Operations $23 $2 $109 $77 ($ in millions) Depreciation ($ in millions)and Amortization $45 $35 $165 $125 ~$210 Non-Cash Lease Amortization Expense4 $
Slide 13: Topgolf's Digital Revenue Opportunity
TOPGOLF’S DIGITAL REVENUE OPPORTUNITY INITIATIVES FROM OUR NEW COMMERCIAL AND DIGITAL TEAM AT TOPGOLF IMPROVED RESERVATION EXPERIENCE ▪ Shortening the time ahead of a reservation where you can book a reservation ▪ Was previously 3 hours but has recently moved to 2 hours and will get shorter over tim
Slide 14: Synergies
SYNERGIES Revenue Synergies Cost Synergies Strong liquidity position accelerates Topgolf venue expansion Lower cost of debt Toptracer bay growth driven by Callaway Golf relationships and sales infrastructure Callaway corporate functions to support Digital marketing initiatives and in-venue brand exp
Slide 15: Topgolf: Attractive Venue Economics with High Return Targets
TOPGOLF: ATTRACTIVE VENUE ECONOMICS WITH HIGH RETURN TARGETS Representative Venue Sizes Target Year-5 Unit Economics1 Small to Medium Medium to Large ($ in millions) Venue Revenue2 $13 - $18 $20 - $28 4-Wall Adjusted EBITDAR Margin ~35% Total Construction Cost (Before Financing) $20 - $27 $30 - $40
Slide 16: UK Venue Performance Proven Over Time
UK VENUE PERFORMANCE PROVEN OVER TIME ($ in millions) 10.4 10.9 9.0 9.4 8.3 8.5 7.5 7.9 6.2 5.4 4.4 Average 2.9 2.9 3.6 2.6 2.8 Revenue1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 2022 2023 4.1 4.1 3.7 2.8 3.1 Average 2.7 2.3 2.3 Adjusted 1.7 1.1 EBITDAR1,2 0.6 0.4 0.4 0.7
Slide 17: U.S. 4-Wall EBITDAR Margins Appreciate Over Time
1,2 U.S. 4-WALL EBITDAR MARGINS APPRECIATE OVER TIME ($ in millions) 33.8% 34.0% 32.9% 30.5% 29.9% 29.4% 28.9% 28.0% 26.1% 23.4% Venue Adjusted EBITDAR1,2 2013 2014 2015 2016 2017 2018 2019 2021 2022 2023 1. Includes all currently operating US venues opened prior to 2023, with exception of Las Vegas
Slide 18: Solid US Venue Performance Proven Over Time
SOLID US VENUE PERFORMANCE PROVEN OVER TIME Revenue EBITDAR 23.4 23.1 ($ in millions) 20.3 19.3 19.4 19.1 19.4 18.5 18.1 11.5 7.0 6.9 8.5 6.8 6.7 6.2 5.7 7.8 6.6 3.2 2 2014 2015 2016 2017 2018 2019 2020 2021 2022 Average 2023 Performance Venues in Cohort (L-M-S)1 5-0-0 9-0-0 6-0-0 7-2-0 9-1-0 4-4-0
Slide 19: 2023 Topgolf US Venue EBITDAR to Total Adj. EBITDA Walk
2023 TOPGOLF US VENUE EBITDAR TO TOTAL ADJ. EBITDA WALK ($ in millions) 1,761 1,625 554 115 72 367 57 21 99 310 304 232 Topgolf US Venue US Venue Cash Rent Venue Financing US Venue 4-wall Cash Pre- US Venue Other Corporate Topgolf Adj. Topgolf Adj. Revenue Revenue 4-wall Cash Interest Adj EBITDA - O
Slide 20: Topgolf Venue Count and Comp Base
TOPGOLF VENUE COUNT AND COMP BASE 3 Global and 68 U.S. venues in Same Venue Sales base as of Q4 2023 2023 Venues: 11 New, 1 Acquired 1 Charleston, SC (72 bays) 2 King of Prussia, PA (102 bays) 3 St. Petersburg, FL (102 bays) 4 Cranston-Providence, RI (102 bays) 5 St. Louis, MO (102 bays) 6 Memphis,
Slide 21: Clear Path to Significant Cash Flow Generation
CLEAR PATH TO SIGNIFICANT CASH FLOW GENERATION 2023 2024 2026 ($ in millions)1 Results Outlook Illustrative Outlook Considerations From 2024 to 2026: Adjusted EBITDA $597 $630 ≥$800 • ~10 venues per year @ $4.5M of embedded cash per venue (including Less: Venue Financing Cash cash payments to REITs)
Slide 22: Capital Expenditure Overview
CAPITAL EXPENDITURE OVERVIEW ($ in millions) 2023 Results 2024 Outlook Future Considerations TOTAL GROSS CAPITAL EXPENDITURES $482 ~$475 For 2024 • 2023 Topgolf Net Growth Capex was TOPGOLF GROSS CAPITAL EXPENDITURES $423 ~$415 positively impacted by timing of REIT TOPGOLF NET CAPITAL EXPENDITURES $
Slide 23: Significant Near Term Earnings Power
SIGNIFICANT NEAR TERM EARNINGS POWER Illustrative ($ in millions, except for EPS)1 2023 Results 2024 Outlook Future Considerations 2026 Adjusted EBITDA $597 $6304 ≥$800 Grows slightly higher than mid-teens to 2026 and then mid-teens to 2028 Non-GAAP Depreciation & Amortization $214 ~$265 ~$365 FY25
Slide 24: Net Debt Leverage, Adjusted for REIT Financing
NET DEBT LEVERAGE, ADJUSTED FOR REIT FINANCING ($ in millions) Notes on DLF obligations December 31, 2023 December 31, 2022 • Similar to rent, but treated Net Debt (1) $2,239.1 $1,883.2 like debt due to GAAP rules Trailing twelve month Adjusted EBITDA (2) $596.6 $558.1 Total Net Debt Leverage Ratio
Slide 25: Appendix
APPENDIX 25 25
Slide 26: Venue Performance Proven Over Time
VENUE PERFORMANCE PROVEN OVER TIME ($ in millions) Average EBITDAR Average Revenue Average EBITDAR2 $ $ CAGR3 7.5 8.3 7.9 8.5 9.0 9.4 10.4 10.9 UK venues1 3.6 4.4 5.4 6.2 4.1 3.7 4.1 12.5% 2.6 2.8 2.9 2.9 0.6 0.4 0.4 0.7 0.7 1.1 1.7 2.3 2.3 2.7 2.8 3.1 0.2 2007 2008 2009 2010 2011 2012 2013 2014 201
Slide 27: Venue Performance Proven Over Time
VENUE PERFORMANCE PROVEN OVER TIME ($ in millions) Average EBITDAR Average Revenue Average EBITDAR2 $ $ CAGR3 22.4 23.4 19.4 19.6 19.3 2016 vintage1 5.7 5.5 6.7 7.5 8.5 8.1% US venues 2018 2019 2021 2022 2023 2018 2019 2021 2022 2023 19.1 16.8 18.3 19.4 2017 vintage 5.6 5.8 5.9 6.8 5.0% US venues 20
Slide 28: Definitions of Certain Financial Measures
DEFINITIONS OF CERTAIN FINANCIAL MEASURES 4-Wall Adjusted EBITDAR, or Adjusted EBITDAR, is a non-GAAP measure calculated as net income (loss) before interest, taxes, depreciation and amortization expense, non-cash stock compensation expense and rent, calculated at the venue level. 4-Wall Adjusted EB
Slide 29: Definitions of Certain Financial Measures Cont.
DEFINITIONS OF CERTAIN FINANCIAL MEASURES CONT. Net Debt of $2,239.1 million for the period ended December 31, 2023 is calculated as total debt of $1,621.5 million, Venue Financing Liabilities related to Topgolf venues of $287.9 million, Deemed Landlord financing obligations of $980.1 million, and e
Slide 30: Q4 2023 Segment Operating Income
Q4 2023 SEGMENT OPERATING INCOME Supplemental Financial Information ($ in millions, except percentages) (Unaudited) Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 Change 2023 2022 Change Topgolf $ 23.1 $ 2.5 n/m $ 108.8 $ 76.8 41.7 % % of segment revenue 5.3 % 0.6 % 470 b
Slide 31: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Non-GAAP Reconciliation and Supplemental Financial Information ($ in millions) (Unaudited) Three Months Ended December 31, 2023 2022 Non-Cash Non- Non-Cash Non- Amortization and Recurring Tax Valuation Non- Amortization, Recurring Tax Valuation Non- GAAP Depreciation(1) Items
Slide 32: Non-GAAP Reconciliation
NON-GAAP RECONCILIATION Non-GAAP Reconciliation and Supplemental Financial Information ($ in millions) Twelve Months Ended December 31, (Unaudited) 2023 2022 Non-Cash Non- Non-Cash Non- Amortization and Recurring Tax Valuation Non- Amortization, Recurring Tax Valuation Non- GAAP Depreciation(1) Item
Slide 33: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Non-GAAP Reconciliation and Supplemental Financial Information ($ in millions) (Unaudited) 2023 Trailing Twelve Month Adjusted EBITDA 2022 Trailing Twelve Month Adjusted EBITDA Quarter Ended Quarter Ended March 31, June 30, September 30, December 31, March 31, June 30,
Slide 34: Topgolf Adjusted EBITDA Reconciliation
TOPGOLF ADJUSTED EBITDA RECONCILIATION Non-GAAP Reconciliation and Supplemental Financial Information ($ in millions) (Unaudited) Three Months Ended December 31, 2023 Twelve Months Ended December 31, 2023 2023 2022 2023 2022 Topgolf Segment operating income(1): $ 23.1 $ 2.5 $ 108.8 $ 76.8 Depreciati
Slide 35: Reconciliation of Free Cash Flow & Embedded Cash Flow
Reconciliation of Consolidated Non-GAAP Free Cash Flow & Embedded Cash Flow Reconciliation of Topgolf Non-GAAP Segment Cash Flows Twelve Months Ended Twelve Months Ended December 31, 2023 December 31, 2023 2023 2022 2023 2022 Topgolf Segment Operating Income (1) $ 108.8 $ 76.8 GAAP Cash Flows from O
Slide 36: Share Count Assumptions
SHARE COUNT ASSUMPTIONS As-Converted Diluted EPS Calculation Adjusted Net Income (for EPS calculations only) • Add ~$1.6M per quarter of after-tax convertible debt interest expense Diluted share count 2023 projection of ~201M shares • Includes 14.7M of shares related to convertible notes Capped call
Topgolf Callaway Brands — Q4 2023 Earnings Presentation on 6ix