Callaway Golf Company · NYSE:CALY
Callaway Golf — Merger or Acquisition (November 2020)
66 slides from Callaway Golf's merger presentation, Nov 12, 2020
Slide 1: A Closer Look at Topgolf's Compelling Value Creation Potential
Exhibit 99.1 A Closer Look at Topgolf’s Compelling Value Creation Potential November 2020Exhibit 99.1 A Closer Look at Topgolf’s Compelling Value Creation Potential November 2020
Slide 2: Disclaimer: Forward-Looking Statements
DISCLAIMER Forward-Looking Statements This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “may,” “should,” “will,” “could,” “would,” “anticipa
Slide 3: Today's Agenda
TODAY’S AGENDA 1. Callaway + Topgolf: Our Vision 2. A Highly Complementary, Highly Attractive Combination 3. Strength, Uniqueness and Potential of Topgolf 4. The Topgolf Platform Venues International Toptracer Media 5. Topgolf Financials 6. Investment Summary 3TODAY’S AGENDA 1. Callaway + Topgolf: O
Slide 4: Today's Presenters
TODAY’S PRESENTERS CHIP BREWER BRIAN LYNCH DOLF BERLE WILLIAM DAVENPORT CRAIG KESSLER Chief Executive Officer EVP, Chief Financial Chief Executive Officer Chief Financial Officer Chief Operating Officer Officer Venues GENIFER GRAY CHRIS CALLAWAY BEN SHARPE STEVE LANE Chief Development President Topt
Slide 5: Callaway + Topgolf = A New Type of Golf Company
CALLAWAY + TOPGOLF = A NEW TYPE OF GOLF COMPANY An Unrivaled Tech Enabled Golf Company Delivering Equipment, Apparel and Entertainment First-Mover Positioned to Create Long-term Competitive Advantages Clear Path to Deliver Exceptional Growth and Strong Shareholder Returns 5CALLAWAY + TOPGOLF = A NEW
Slide 6: Callaway + Topgolf = Better Together
CALLAWAY + TOPGOLF = BETTER TOGETHER Highly complementary businesses well-positioned to accelerate growth and enhance competitive advantages across the platform Significant technology leadership with proven proprietary in-house capabilities Broad reach and significant consumer overlap enhances value
Slide 7: Compelling Potential for Shareholder Value Creation
COMPELLING POTENTIAL FOR SHAREHOLDER VALUE CREATION ($ in millions) 2019 Pro Forma 2022E Longer Term Revenue $2,761 $3,200 ~10% $270 $360 Mid-to-High Teens Adj. EBITDAS Combined Company Has Clear Line of Sight to Generating More Than $1B of Adj. EBITDAS 7COMPELLING POTENTIAL FOR SHAREHOLDER VALUE CR
Slide 8: The Combined Company Is Good for Golf
THE COMBINED COMPANY IS GOOD FOR GOLF… Favorable Trends Both On- and Off-Course Attractive Position Across Golf CAGR Traditional Golf +2.6% ’16-’19 Callaway is revolutionizing golf equipment through AI technology and 34.2 33.5 innovative golf ball design 32.0 32.1 31.1 Market leader with seven conse
Slide 9: ... and Will Reach All Golf Consumers
… AND WILL REACH ALL GOLF CONSUMERS 1 Unparalleled consumer reach across $80B+ global golf industry • The #1 Driver on major • #1 brand rating by avid 2 worldwide tours golfers since summer 2017 Elite Touring Avid • #1 Putter on Tour • #1 or #2 hard goods market Professionals Amateurs share in US, J
Slide 10: Unrivaled Position to Define the Future of Golf
UNRIVALED POSITION TO DEFINE THE FUTURE OF GOLF Clear first-mover advantages: Equipment • Proprietary in-house technology Apparel • Unmatched reach Experiences • Passionate consumer following Digital Games • Global scale Digital Communities • Proven innovators Poised to define the expansion of the g
Slide 11: This Creates an Ecosystem That Benefits Both Companies
THIS CREATES AN ECOSYSTEM THAT BENEFITS BOTH COMPANIES What Callaway provides to Topgolf • Ample liquidity to fund growth • Relationships and global reach to accelerate Toptracer bay acquisition • Strong marketing support to drive SVS (via awareness and interest) • Back office support What Topgolf p
Slide 12: Callaway's Peer Set Is Expanding
IBDROOT\PROJECTS\IBD-NY\PUTPUT2019\638473_1\Presentations\2020\2020.11.6 - Peer Information\Pro Forma Peers_v11.pptx CALLAWAY’S PEER SET IS EXPANDING Venue Based High Growth Restaurant Sports Digital and Golf Equipment Entertainment Outdoor Apparel Peers Franchise Peers Emerging Peers Peers Median ’
Slide 13: Topgolf Overview
DOLF BERLE Chief Executive Officer TEG Overview 13DOLF BERLE Chief Executive Officer TEG Overview 13
Slide 14: Our Mission
OUR MISSION ay vy TOPGOLF Our mission is to connect people in” Sa meaningful ways through the 4 4 experie| e create, the ifihoy we champion g we providing memorable exp our community of millions of
Slide 15: Topgolf Platform Overview
TOPGOLF PLATFORM OVERVIEW 58 US venues 21% annual growth in venues from 2017-2019 23MM total venue visits 200 venue total addressable market VENUES Broad global appeal outside the US 5 venues open (3 owned & operated, 2 franchised) 250 venue total addressable market internationally 100MM+ Fan Touchp
Slide 16: Rapid Growth in Brand Awareness with Room for Expansion
RAPID GROWTH IN BRAND AWARENESS WITH AMPLE ROOM FOR FURTHER EXPANSION 1 2 National Aided Brand Awareness Consumers with a Positive Opinion (%) Rolling Three Month Average (%) 90 88 85 35 YoY Growth: 9pp 80 79 79 26 21 75 YoY Growth: 6pp 15 70 70 65 64 60 December December 2018 2019 3 Local Venue Foo
Slide 17: Strong Competitive Position
STRONG COMPETITIVE POSITION Innovative, Proprietary Technology that Enhances All of Our Business Lines Significant Brand Halo and Massive Strong Customer Advocacy Network of Screens Deep Experience Operating Brand Power and Venue Large, Complex Venues with Real Estate Execution Make Us a Tenant and
Slide 18: Well Positioned for Post-COVID Economy
WELL POSITIONED FOR POST-COVID ECONOMY Unique venue layout provides safe social distancing in an outdoor experience. We expect guests to associate 1 Topgolf and golf as safe social activities Reopened all venues by 9/7 and opened four new venues since March 2020. Continue to manage evolving 2 govern
Slide 19: Visionary, Proven and Multi-Disciplined Management Team
VISIONARY, PROVEN AND MULTI-DISCIPLINED MANAGEMENT TEAM Seasoned executives with a proven track record of operating complex, high-growth businesses BEN SHARPE ERIK ANDERSON DOLF BERLE WILLIAM DAVENPORT BECKY FINE C CH HR RIIS S C CA AL LL LA AW WA AY Y ChiefDevelopment Officer President Transitionin
Slide 20: Venues Overview
GENIFER GRAY CRAIG KESSLER Chief Operating Officer VP of Operations Venues Venues Overview 20GENIFER GRAY CRAIG KESSLER Chief Operating Officer VP of Operations Venues Venues Overview 20
Slide 21: Venues Offer a Social Experience Across Broad Demographics
VENUES OFFER A SOCIAL EXPERIENCE EMBRACED ACROSS BROAD DEMOGRAPHIC GROUPS Topgolf venues introduce millions of guests to the brand, culture and technology each year Venue Visits Demographic Breakdown By Income By Age Age HHI < >34 $80K 30% 40% HHI > Age 48% $80K 18-34 60% 22% Age <18 1 By Skill Leve
Slide 22: Topgolf Venues Provide "Bang for Your Buck" Entertainment
TOPGOLF VENUES PROVIDE “BANG FOR YOUR BUCK” ENTERTAINMENT Average Cost per Visit / Person $123 $109 $106 $94 $51 Median: $51 $36 $35 $33 $16 $11 1 2 3 4 5 6 7 8 Broadway Play / Fine Dining Sporting Events Concert Theme Parks Round of Golf Workout Class Movie Theater Cultural Sites / 9 Musical Museum
Slide 23: Building Scale Through Accelerated Rollout
BUILDING SCALE THROUGH ACCELERATED ROLLOUT Rapid growth exhibited by 51 venues opened since 2013 Domestic Venue Count Since Inception 58 54 47 37 28 21 12 7 3 1 2005 2010 2013 2014 2015 2016 2017 2018 2019 Today 23BUILDING SCALE THROUGH ACCELERATED ROLLOUT Rapid growth exhibited by 51 venues opened
Slide 24: Breaking Down the Venue Revenue Mix
BREAKING DOWN THE VENUE REVENUE MIX Gameplay Food & Beverage Events • Variety of games, including signature • High quality food & beverage • Tailored spaces are able to Topgolf Game, iconic golf courses, delivered at scale to walk in and event accommodate events ranging from and Angry Birds guests c
Slide 25: World-Class Gameplay Powered by Proprietary Technology and Games
WORLD-CLASS GAMEPLAY POWERED BY PROPRIETARY TECHNOLOGY AND GAMES • We offer a variety of game options designed to appeal to a broad range of guests, including our signature Topgolf game, which allows guests to score points by hitting into the targets in our outfield. Introducing virtual scoring powe
Slide 26: Share-able and Instagram-able Gourmet Food and Beverage Offering
SHARE-ABLE AND INSTAGRAM-ABLE GOURMET FOOD AND BEVERAGE OFFERING • We feature a seasonal menu of high-end, curated appetizers, entrées and desserts that are carefully selected for the Topgolf brand • Executive Chef in every venue with chef-driven menu offerings made largely from scratch to further d
Slide 27: Venue of Choice for Both Large and Small Events
VENUE OF CHOICE FOR BOTH LARGE AND SMALL EVENTS • Each of our venues has dedicated areas for hosting events ranging in size from 12 to up to 1,000 attendees, including full venue buyouts • Ability to scale events service for all types, sizes and price points is difficult to execute operationally, ma
Slide 28: Venues Are a Platform for Multiple Forms of Entertainment
VENUES ARE A PLATFORM FOR MULTIPLE FORMS OF ENTERTAINMENT While the in-bay experience is a primary …We have matured our programming to create multiple driver of venue visits … entertainment formats to delight our guests 28VENUES ARE A PLATFORM FOR MULTIPLE FORMS OF ENTERTAINMENT While the in-bay exp
Slide 29: Resiliency of Venues Through COVID-19
RESILIENCY OF VENUES THROUGH COVID-19 Outdoor Teeline Provides Safe Space to Socialize Safe distance between bays and full-bay cleaning between groups Guests are recognizing and appreciating our efforts 1 Early Guest Scores are Extremely Positive Likelihood to Return Overall Satisfaction 81% 79% 73%
Slide 30: Venue Development
CHRIS CALLAWAY Chief Development Officer Venue Development 30CHRIS CALLAWAY Chief Development Officer Venue Development 30
Slide 31: Topgolf's Venue Formats
TOPGOLF’S VENUE FORMATS Large Venues Medium Venues Small Venues • Target population of >1MM in 25 min catchment • Target population of 500K-1MM in 25 min • Target population of 200K-500K in 25 min catchment catchment • 100+ bays across three floors • 70 - 100 bays across 2-3 floors • 30-60 bays on a
Slide 32: Topgolf's Global Success
TOPGOLF’S GLOBAL SUCCESS million venue U.S. venues in three International 1 visits in 2019 format sizes venues 23 58 5 Large venue • 100+ bays • 45 locations Medium venue • 70-100 bays • 13 locations Small venue • 30-60 bays • 5 locations 1 Three owned-venues, two franchised venues 32TOPGOLF’S GLOBA
Slide 33: Venue Site Selection
VENUE SITE SELECTION Rigorous site selection process ensures expansion into high revenue as well as high ROI markets and supports remaining venue whitespace Extensive nationwide network uses data-driven site selection process to source potential deals and communicate to real estate team Engage in in
Slide 34: Venue Construction and Financing
VENUE CONSTRUCTION AND FINANCING Third-Party Financing Construction • Venues range in size from less than 20,000 to up to • Topgolf partners with well-capitalized REIT partners, 105,000 sq. ft. with up to four floors (9 to 15 acre who provide capital for the land acquisition and fund sites) up to ~7
Slide 35: Established Venue Pipeline & Proven Track Record
ESTABLISHED VENUE PIPELINE & PROVEN TRACK RECORD Between 2015 and Q3 2020, Topgolf grew its domestic venue count from 21 to 58 venues. The depth of Topgolf’s pipeline allows us to target 10 new venue openings per year beginning in 2022 High Historical Status of Upcoming Overview of 2021 Domestic Ven
Slide 36: Topgolf International
STEVE LANE Vice-President International Strategy and Franchise Management Topgolf International 36STEVE LANE Vice-President International Strategy and Franchise Management Topgolf International 36
Slide 37: Rapidly Growing Global Footprint
RAPIDLY GROWING GLOBAL FOOTPRINT Watford, UK Opened in 2000 Glasgow (UK) Watford, Herts (UK) Oberhausen, Germany Surrey, Surrey (UK) Chigwell, Essex (UK) Gold Coast, AU Opened in 2018 Dubai (UAE) Monterrey (Mexico) Gold Coast, Queensland Monterrey, MX Opened in 2020 (Australia) Countries with Dubai,
Slide 38: Rapidly Growing Global Footprint: Franchise Partners
RAPIDLY GROWING GLOBAL FOOTPRINT Our Franchise Partners Today • Global expansion plan utilizes a capital-light franchise model • The franchisee manages operations and funds capital expenditures and growth, requiring minimal upfront investment from Topgolf • Provides Topgolf with a recurring royalty
Slide 39: Toptracer Platform
BEN SHARPE President Toptracer Toptracer Platform 39BEN SHARPE President Toptracer Toptracer Platform 39
Slide 40: Toptracer Overview
TOPTRACER OVERVIEW Highly visible broadcast partnerships expand range technology opportunity and grow brand… …as Topgolf brings a leading ball-tracking technology to your driving range and onto your phone/tablet Proven Compelling Rapid Exciting Connected Worldwide Growth Experience Screen Potential
Slide 41: Toptracer Range Suitable for Covered & Uncovered Bays
TOPTRACER RANGE SUITABLE FOR COVERED & UNCOVERED BAYS Toptracer Range System: • Camera sensors • 21” screens in bays • Game and bay mgmt software • Shot tracking capabilities 41TOPTRACER RANGE SUITABLE FOR COVERED & UNCOVERED BAYS Toptracer Range System: • Camera sensors • 21” screens in bays • Game
Slide 42: Toptracer Range Delivers Value to Range Operators
TOPTRACER RANGE DELIVERS VALUE TO RANGE OPERATORS Mistwood Golf Dome Silvermere Golf & Leisure Itakano Golf Center Whaleback Golf Course Chicago, IL Surrey, UK Osaka, Japan Perth, Australia After installing TTR, YoY Increased annual ball count Average monthly visitors are Topline increase of 35%-40%
Slide 43: We Are Building a Massive Community
WE ARE BUILDING A MASSIVE COMMUNITY In December 2019, we hosted our first Toptracer Range Global Tournament, a 9-Shot closest to the pin tournament Over 80% participation across installed ranges, with 29,000 games across 175 driving ranges in 19 countries • December 2019 • Successful proof of concep
Slide 44: Broad Cohort of Partnerships Poised for Expansion
BROAD COHORT OF PARTNERSHIPS POISED FOR EXPANSION Toptracer’s Global Reach Set to Accelerate in Partnership with Callaway Current Distribution Channels Sales Partners Leading, Global Professional Golf Club Governing Bodies / Commercial Partners Management Companies Expected Benefits from Callaway’s
Slide 45: Topgolf Media
DOLF BERLE Chief Executive Officer Topgolf Media 45DOLF BERLE Chief Executive Officer Topgolf Media 45
Slide 46: Attracting, Aggregating, and Engaging a Global Audience
ATTRACTING, AGGREGATING, AND ENGAGING A GLOBAL AUDIENCE Interactive Media to Build a Global R&D Engine Monetization Audience Technology & Video Content Games Sponsorships • Original content to attract and develop audiences • World Golf Tour #1 realistic digital golf game with • Partner with big bran
Slide 47: World Golf Tour Is the Leading Realistic Digital Golf Game
WORLD GOLF TOUR IS THE LEADING REALISTIC DIGITAL GOLF GAME • Founded in 2005 and continues to be an enduring game with continued growth and profitability 15 years after inception • Topgolf aggregated WGT in 2016 for its engaged community and talented game developers • WGT is an online multiplayer vi
Slide 48: Topgolf Financial Overview
WILLIAM DAVENPORT Chief Financial Officer Topgolf Financial Overview 48WILLIAM DAVENPORT Chief Financial Officer Topgolf Financial Overview 48
Slide 49: Key Financial Takeaways
KEY FINANCIAL TAKEAWAYS • Proven Success and Growth Across Business Lines with Clear Line of Sight for Further Expansion • Significant Investments Made in Recent Years to Drive Growth in Early-Stage Business Lines • Strong Unit Level Economics And Consistent Performance Across Platform • FCF Positiv
Slide 50: Proven Success and Growth Across Business Lines Have Driven Strong Momentum
PROVEN SUCCESS AND GROWTH ACROSS BUSINESS LINES HAVE DRIVEN STRONG MOMENTUM Revenue ($MM) Gross Margin ($MM) Adj. EBITDAS ($MM) 1,060 2019 PF Adj. 916 EBITDAS - 862 (1) $77M 747 59 59 630 545 10 2017 2018 2019 2017 2018 2019 2017 2018 2019 Margin: 86.4% 86.7% 86.4% 1.6% 6.8% 5.6% Venues Segment Othe
Slide 51: Strong Growth Across All Key Performance Metrics
STRONG GROWTH ACROSS ALL KEY PERFORMANCE METRICS (2) Revenue ($MM) Adj. EBITDAS Worldwide Fan Touchpoints (MM) 2019 PF Adj. EBITDAS - (1) $77M 91 $1,060 70 $58.8 $59.2 $862 52 $630 $10.4 2017 2018 2019 2017 2018 2019 2017 2018 2019 Toptracer Range Bays Installed Domestic Venue Count International Ve
Slide 52: Toptracer Unit Economics
TOPTRACER UNIT ECONOMICS Summary • Attractive recurring revenue potential with limited upfront investment of ~$3k per bay Annual Target Revenue • Strong upside for independent range owners $2,000 per Bay – many licensees have reported 25-60% revenue increases Annual Target Cash • Continued momentum
Slide 53: Venues Generating Attractive Economics
VENUES GENERATING ATTRACTIVE ECONOMICS Summary • Target cash-on-cash returns of ~50% • Venues typically open to strong sales results, Target Avg. Venue followed by a “honeymoon” impact resulting 1 $17 M Revenue in a ~5% - 10% reduction in year-two revenue Target Avg. Venue 2 • Experienced operating
Slide 54: Targeted Venue-Level Adjusted EBITDAS Supported by Historical Results
TARGETED VENUE-LEVEL ADJUSTED EBITDAS SUPPORTED BY HISTORICAL RESULTS $38M $13M Summary Other $210M 3 Venues 2019 Openings ($74M) $187M • Achieved Pro Forma Adjusted EBITDAS Impact of across 36 historical large venues open prior Financing 1,2 Accounting to 2019 of $210M ($5.8M / venue) for Historica
Slide 55: Venue Profitability Is Supporting Growth Investments
VENUE PROFITABILITY IS SUPPORTING GROWTH INVESTMENTS IN PROVEN COMPLEMENTARY BUSINESS LINES $187M Summary • Invested ahead of growth in order to scale rapidly • Complementary business lines are poised to ($109M) generate future profit due to strong Overhead foundations created 2017-2019 ($18M) $59M
Slide 56: How to Think About the FY22 Adjusted EBITDAS
HOW TO THINK ABOUT THE FY22 ADJUSTED EBITDAS Illustrative Adj. EBITDAS ($M) • Start with the FY19 Adjusted EBITDAS $59 • Assumes existing venues perform at 2019 levels • Growth in the Venue business • Annualized FY19 venues $15 • New FY20 and FY21 venues (13 venues * $5M/venue) $65 • Partial year FY
Slide 57: Topgolf COVID Update & Outlook
TOPGOLF COVID UPDATE & OUTLOOK COVID-19 Initial Response • All venues closed by March 18, 2020 • Within two weeks of venue closure, Topgolf implemented significant cost reductions, negotiated rent deferrals and trade extensions • Reduced venue and corporate associates to essential levels to navigate
Slide 58: Realizing the Full Potential of Topgolf
BRIAN LYNCH CHIP BREWER EVP, Chief Financial Chief Executive Officer Officer Realizing the Full Potential of Topgolf 58BRIAN LYNCH CHIP BREWER EVP, Chief Financial Chief Executive Officer Officer Realizing the Full Potential of Topgolf 58
Slide 59: Well-Positioned to Fund Future Growth
WELL-POSITIONED TO FUND FUTURE GROWTH • Ample liquidity to accelerate momentum • More than $630M of cash and available facilities as of Q3, nearly $300M higher than same period of 2019 • Significant projected excess capital provides cushion well above need • Callaway investments near-complete, clear
Slide 60: Growth Capital from Callaway Will Drive Penetration into Addressable Market
GROWTH CAPITAL FROM CALLAWAY WILL DRIVE PENETRATION INTO ADDRESSABLE MARKET Summary Capital Usage Breakdown • $325M in growth capital from Callaway Venue Maintenance 9% through 2023 primarily to fund new venue Capex growth and other discretionary investments Other Non-Venue 27% until the company gen
Slide 61: Why This Is a Great Deal
WHY THIS IS A GREAT DEAL Reasons these businesses are poised for long-term success: Callaway business Topgolf business • Will continue to provide great customer experiences / guest satisfaction • Golf Equipment is a profitable and stable business with tailwinds from recent increases in participation
Slide 62: Callaway + Topgolf = A New Type of Golf Company
CALLAWAY + TOPGOLF = A NEW TYPE OF GOLF COMPANY An Unrivaled Tech Enabled Golf Company Delivering Equipment, Apparel and Entertainment First-Mover Positioned to Create Long-term Competitive Advantages Clear Path to Deliver Exceptional Growth and Strong Shareholder Returns 62CALLAWAY + TOPGOLF = A NE
Slide 63: Q&A
Q&A 63Q&A 63
Slide 64: Appendix
APPENDIX 64APPENDIX 64
Slide 65: Majority of Topgolf's Addressable Market Remains for Each Business Line
APPENDIX: MAJORITY OF TOPGOLF’S ADDRESSABLE MARKET REMAINS FOR EACH BUSINESS LINE International Domestic Venues Toptracer Range Media Total Venues ~2 Game Potential; 1 Identified path to: 200 venues 152,500 bays 250 venues $1.50 sponsorships revenue / visit 2 Unit-level Revenue $6-24M $2,000 / Bay $
Slide 66: 2022 EBITDA Supplement and Non-GAAP Reconciliation
APPENDIX: 2022 EBITDA SUPPLEMENT AND NON-GAAP RECONCILIATION Combined Company Supplemental Financial Information and Non-GAAP Reconciliation (Unaudited) Twelve months ended December Twelve months ended December 31, 2019 31, 2022 Callaway Golf Topgolf Combined Combined Revenue $1,701.1 $1,059.9 $2,76
Callaway Golf — Merger or Acquisition (November 2020) on 6ix