CARLSBAD, Calif., Feb. 10, 2022 /PRNewswire/ -- Callaway Golf Company (the "Company" or "Callaway") (NYSE: ELY) announced today its financial results for the fourth quarter and full year ended December 31, 2021.

"I am pleased to announce another quarter of strong results, driven primarily by Topgolf domestic venues, which benefited from increased social and corporate events bookings and high walk-in guest turnout, along with continued momentum in our apparel and golf equipment businesses," commented Chip Brewer, President and Chief Executive Officer of Callaway. "The quarter topped off a truly outstanding year for Callaway and I am extremely proud of the global team for their efforts. This was a record year in many aspects, and I am excited about the opportunity to build on this strong foundation as we look ahead to 2022 and beyond."

"The combination of Topgolf and Callaway early in the year was transformational and we have been thrilled by the strong revenue growth and profitability, with both exceeding our initial expectations. We believe our strong pipeline for new venues, along with the rapid expansion of our Toptracer range technology, will deliver significant long-term shareholder value," continued Mr. Brewer. "In our golf equipment business, we proved our ability to adapt and flex our operations to meeting the growing demand for the sport of golf. Given current trends and positive industry fundamentals, we believe this segment will continue to grow in 2022. Lastly, our apparel concepts performed extremely well across all channels and all regions and have strong brand momentum moving into the year ahead. Overall, we have never been more confident in the direction of this business and the opportunity for growth ahead."

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 fourth quarter and twelve months ended December 31, 2021 (in millions, except EPS):

GAAP RESULTS

NON-GAAP RESULTS

Fourth Quarter 2021 Financial Highlights
(All comparisons to prior periods are calculated on a year-over-year basis)

• Net revenue increased 90%, driven by the addition of Topgolf, which benefited from strong walk-in traffic and social event bookings, along with better-than-expected corporate events business, as well as growth in the Apparel, Gear and Other segment.
  
• Non-GAAP income from operations decreased $21 million year-over-year, due to a planned decrease in golf equipment sales as the Company shifted production of golf equipment to build 2022 new launch product during the fourth quarter of 2021 and increased operating expenses. In addition, Callaway launched several new products in the comparable fourth quarter 2020 creating an uneven year-over-year comparison.
  
• Non-GAAP other income/(expense), net decreased $(24) million to $(37) million, primarily due to a $28 million increase in interest expense related to the addition of Topgolf.
  
• Non-GAAP loss per share was ($0.19) in the fourth quarter of 2021, compared to a loss of ($0.33) per share in 2020. Diluted shares were 186 million shares of common stock, an increase of 92 million shares compared to 94 million shares in the fourth quarter of 2020. The increased share count is primarily related to the issuance of additional shares in connection with the Topgolf merger.
  
• Fourth quarter 2021 Adjusted EBITDA increased $27 million, driven by a $46 million contribution from the Topgolf business, partially offset by lower adjusted EBITDA in the golf equipment and apparel businesses. On a full year basis, Topgolf Adjusted EBITDA contribution was $177 million. Due to the timing of the Topgolf acquisition on March 8, 2021, Callaway's full year results for 2021 only include approximately 10 months of Topgolf results and therefore do not include January and February results, which were in the aggregate $2.3 million in Adjusted EBITDA.
  
• During the fourth quarter 2021, Callaway repurchased a total of 946,637 shares at an average price of $26.41. There remains approximately $25 million in the Company's authorized share repurchase program announced on December 13, 2021.

SEGMENT RESULTS

The following is a reconciliation of income before income taxes to total segment operating income (in millions) for the fourth quarter and twelve months ended December 31, 2021 and 2020:

The table below provides the breakout of segment revenues and segment operating income for the fourth quarter and twelve months ended December 31, 2021:

Fourth Quarter 2021 Segment Highlights
(All comparisons to prior periods are calculated on a year-over-year basis)

• Topgolf
• Contributed $336 million of revenue and $6 million of segment operating income in the fourth quarter of 2021, driven primarily by strong walk-in traffic, continued demand for social events and better-than-expected corporate event bookings.
• Same venue sales surpassed expectations in the quarter, increasing 6% compared to the 2019 level and generating strong flow-through to Adjusted EBITDA.
• Opened a total of nine new domestic venues in 2021, including one new location in Ft. Myers, FL during the fourth quarter of 2021.
• Golf Equipment
• Revenue decreased 24.5% year-over-year due to a planned shift in production to build 2022 new launch product and increased operating expenses. In addition, Callaway launched several new products in the comparable fourth quarter 2020 creating an uneven year-over-year comparison. Compared to fourth quarter 2019 pre-pandemic levels, revenue increased 5.7%.
• Golf Equipment segment operating income decreased $(29) million due primarily to lower revenue compared to 2020.
• Apparel, Gear and Other
• Revenue increased 33.4% year-over-year, driven by a 39.8% increase in apparel sales and a 19.3% increase in gear and other sales across TravisMathew, Jack Wolfskin and Callaway brands.
• Operating income for the Apparel, Gear and Other segment increased $7 million year-over-year to $(2) million in the fourth quarter of 2021.

FULL YEAR 2022 BUSINESS OUTLOOK

The full year 2022 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 and staffing levels at our Topgolf venues, (2) changes in foreign currency effects, which are estimated to have a negative full year impact of $54 million on net sales and $38 million on pretax income, and (3) increased freight costs.

Net Revenue: Full year 2022 net revenue estimate assumes Topgolf segment revenue of approximately $1.5 billion for the twelve months ended December 31, 2022, as well as continued positive demand fundamentals for Callaway's Golf Equipment and Apparel, Gear and Other segments.

Adjusted EBITDA: Full year 2022 Adjusted EBITDA estimate assumes the Topgolf segment will deliver $210 - $220 million in Adjusted EBITDA for the twelve months ended December 31, 2022.

FIRST QUARTER 2022 BUSINESS OUTLOOK

The first quarter 2022 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 Omicron variant, (2) changes in foreign currency effects, which are estimated to have a negative impact of $21 million on net sales and $21 million on pretax income (including Q1 2021 hedge gains that do not repeat), and (3) increased freight costs.

ADDITIONAL INFORMATION AND DISCLOSURES

Conference Call and Webcast

The Company will be holding a conference call at 2:00 p.m. Pacific time today, February 10, 2022, 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 February 17, 2022. 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 and depreciation of intangibles and other assets related to the Company's acquisitions (including an impairment charge of $174 million recorded in 2020), non-cash amortization of the debt discount related to the Company's convertible notes, acquisition and other non-recurring items (including a $253 million non-cash gain in 2021 resulting from the Company's pre-merger equity position in Topgolf), and a non-cash valuation allowance recorded against certain of the Company's deferred tax assets as a result of the Topgolf merger.

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.

For forward-looking Adjusted EBITDAinformation provided in this release, reconciliation of such forward-looking Adjusted EBITDA to the most closely comparable GAAP financial measure (net income) is not provided because the Company is unable to provide such reconciliation without unreasonable efforts. The inability to provide a reconciliation is because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact net income in the future but would not impact Adjusted EBITDA. These items may include certain non-cash depreciation, which will fluctuate based on the Company's level of capital expenditures, non-cash amortization of intangibles related to the Company's acquisitions, income taxes, which can fluctuate based on changes in the other items noted and/or future forecasts, and other non-recurring costs and non-cash adjustments. Historically, the Company has excluded these items from Adjusted EBITDA. The Company currently expects to continue to exclude these items in future disclosures of Adjusted EBITDA and may also exclude other items that may arise. The events that typically lead to the recognition of such adjustments are inherently unpredictable as to if or when they may occur, and therefore actual results may differ materially. This unavailable information could have a significant impact on net income.

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 in the year of comparison.

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 first quarter and full year 2022 guidance (including net 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, venue/bay expansion plans, 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