Callaway Golf raised its guidance for the full year once again, after revenues in the third quarter increased by 80.1 percent as compared to the year earlier to $856.5 million, continuing to benefit from the addition in March of Topgolf and a better-than-expected contribution to its top line from golf equipment and apparel, including Jack Wolfskin. On an organic basis, sales were up by 11 percent from a year ago.
“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,” said Chip Brewer, CEO of the group.
However, Callaway reported a net loss of $16.0 million in the third quarter against a profit of $52.4 million the year earlier, due to a doubling in interest expense, a tax valuation allowance of $32.8 million and other extraordinary items related to the integration of Topgolf. Excluding these items, the group’s adjusted Ebitda jumped by 57 percent in the quarter to $139 million, driven by a $59 million contribution from TopGolf and partially offset by increased operating expenditures and the legacy business’ spending levels returning to normal levels.
The gross margin for product sales expanded by 3.1 percentage points to 45.3 percent in the quarter.
Topgolf contributed $333.8 million of revenues and $23.9 million of segment operating income to third-quarter results, driven mainly by strong domestic venue walk-in traffic, better-than-expected event bookings and the opening of new venues.
Revenues from golf equipment rose by 8.4 percent to $289.6 million, and they were up by 37.6 percent as compared to the third quarter of 2019. Golf club sales rose by 9.5 percent as compared to the year earlier and by 36.5 percent versus the third quarter of 2019, while sales of golf balls went up by 4.1 percent on the year and by 41.8 compared with the third quarter of 2019.
On the other, the operating profit of the golf equipment segment decreased by 19.3 percent year-on-year to $45.8 million, due to higher freight costs and a return to more normal operating expenses.
Callaway’s revenues from softgoods increased by 11.9 percent to $233.1 million, driven by a 19.6 percent increase in apparel sales across the Jack Wolfskin, TravisMathew and Callaway brands that was achieved despite global supply headwinds. Segment sales were only 8 percent higher than two years ago because of a slower recovery for Jack Wolfskin from pre-pandemic levels. Operating earnings generated by softgoods increased by 33.7 percent to $34.6 million as compared to last year.
On a geographical basis, the group’s sales in the U.S. soared by 157.6 percent to $552.9 million. Sales in Europe amounted to $157.2 million, with 14.2 percent growth at constant currency rates. Sales in Japan amounted to $63.4 million and stood at $82.9 million in the rest of the world, reflecting currency-neutral growth rates of 16.5 percent and 14.5 percent, respectively.
Callaway now anticipates full-year revenues of $3,110-$3,120 million, up from its previous estimate of $3,065-$3,095 million. That assumes that Topgolf revenues for the 10 months beginning on March 8 will be slightly above the level reached in all of 2019 as well as continued positive demand fundamentals for softgoods and golf equipment and improved supply in golf equipment during the fourth quarter. Callaway is also now projecting adjusted Ebitda of $424-$430 million against $370-$390 million previously.
