Lost in this week’s big TaylorMade news is the fact that golf’s two other top dogs have released remarkably strong Q1 financial reports. Both Callaway and Acushnet blew away 2020’s COVID-infected Q1 results. What makes it interesting is both companies outperformed their pre-COVID 2019 numbers.  

And not by a little, either.  

Acushnet is reporting $581 million in sales for Q1. That’s up 42 percent from 2020 and 34 percent from 2019. Callaway, meanwhile, says it hit $652 million in Q1. That’s a new Q1 company record. It also represents a 47-percent increase over last year and a 26-percent jump from 2019. 

What’s more, both companies reported healthy net profits.  

No doubt about it. The golf business is hot right now.  

Q1 Financial Reports: Acushnet 

Acushnet ended 2020 by reclaiming its title as the No. 1 company in golf. It even posted a COVID-diminished $96-million net profit for the year. Last year’s second-half momentum shows no signs of letting up.  

“Acushnet is off to a promising start to 2021 as demand for all Acushnet product categories is strong and rounds of play momentum continues,” said Acushnet President and CEO David Maher in the company’s Q1 financial report press release. “Sales growth across all segments was fueled by our Product Development teams and the outstanding execution of our Operations team by keeping pace with strong consumer demand.” 

Titleist clubs and balls led the way. Club sales increased 67 percent compared to Q1 last year to $156 million. The new TSi metal woods and Scotty Cameron Phantom X putters fueled the charge along with higher selling prices across all categories. Vokey wedge sales were down in Q1 though, largely due to the fact the line is in its second year.  

Titleist golf ball sales jumped by nearly 50 percent compared to Q1 2020 to $174 million. The new Pro V1 line sparked that increase.  

Additionally, Titleist Gear sales (bags, hats, accessories) totaled $53 million, up 22 percent over last year. And FootJoy sales totaled $159 million, also an increase of 22 percent.  

Regionally, U.S. sales jumped 46 percent year over year. Sales in Japan and Korea increased 50 percent and 57 percent respectively and what Acushnet calls the Rest of World increased 61 percent.  

Europe spent Q1 still in various stages of lockdown, however. Sales there were still up in the Q1 financial report but only by eight percent.  

Q1 financial reports

Profits and Specifics 

While the top line is impressive, the bottom line makes investors smile. Acushnet is reporting an $85-million Q1 net profit. That’s a crazy 855-percent increase over the $9-million profit posted in Q1 2020. It’s an even crazier 144-percent increase over the pre-COVID 2019 Q1 profit.  

Acushnet’s Q1 EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $135 million, a 156-percent jump over 2020 and a 111-percent increase from 2019. 

Like every other OEM, Acushnet is riding golf’s new popularity wave. Having new metalwoods and balls to sell certainly helps. And while it’s difficult to be specific with numbers, the lack of a PGA Merchandise Show this year as well as overall travel restrictions had to have played a role in controlling costs. Acushnet’s Selling, General and Administrative costs (which include marketing, travel and entertainment, sales commissions, programs and other overhead) were higher this year compared to last. However, it was only by $23,000, a minuscule increase considering a 42-percent increase in actual sales. 

Q1 financial reports

Acushnet did see the writing on the wall last year and prepared for the worst. At the end of Q1 2020, the company made sure it was flush with cash to help navigate the coming lockdowns. This year, Acushnet reports just over $113 million cash and cash equivalents on hand (compared to $151 million last year). However, in another sign of a recovering golf economy, Accounts Receivable are up by more than 48 percent. That means retailers and green grass accounts are stocking up.

With new irons on the horizon for 2021 and with the U.S. and, eventually, Europe emerging from COVID-related restrictions, there’s no reason to think Acushnet can’t top its 2019 numbers.  

Q1 Financial Reports: Callaway 

As mentioned, Callaway is reporting a Q1 record $652 million in sales, which is a 47-percent increase over Q1 2020. Callaway is also reporting a Q1 Net Income of $272 million. That, however, requires an asterisk, which we’ll get to.  

“Our golf equipment business is continuing to experience unprecedented demand while our soft goods business and Topgolf business are recovering from the pandemic faster than anticipated,” said CEP Chip Brewer in a prepared statement. “We believe our three operating segments are well positioned for both the current environment and our expectations over the next several years.” 

Q1 financial reports

The Callaway-Topgolf merger became official in March so Callaway’s Q1 Financials include four weeks’ worth of TopGolf revenue. That move prompted Callaway to create three specific business units: Golf Equipment, Apparel and Gear and Topgolf. For Q1, Golf Equipment sales (clubs and balls) topped $377 million. Club sales accounted for $316 million of that total (26-percent increase from Q1 2020) while ball sales totaled nearly $61 million. The ball sales figure represents a 50-percent increase over last year but Callaway is still light years behind Titleist’s $174-million quarterly figure.

Apparel and Gear sales totaled $182 million in Q1 (a 21-percent increase). That was a near-even split between apparel (Callaway-branded, TravisMathew and Jack Wolfskin) at $95 million and Gear (bags, gloves and accessories) at $87 million.  

Regionally, U.S. sales grew by a whopping 78 percent over last year to $388 million. Unlike Acushnet, Callaway sales actually dropped in Japan by seven percent. Like Acushnet, European sales were sluggish but did manage to grow by 12 percent. Sales in what Callaway defines as Rest of World grew by 64 percent.  

Profits and Specifics 

Remember that asterisk attached to Callaway’s reported $272-million Q1 net profit we mentioned a few paragraphs ago? It’s really an on-paper profit thanks to some necessary accounting maneuvers. Callaway’s Q1 profit from operations is a none-too-shabby $76 million. The rest is due to the Topgolf merger. Callaway already owned 14 percent of Topgolf and the merger deal itself was worth nearly $2.5 billion once Callaway assumed all of Topgolf’s debt.  

As a result of the deal, Callaway’s 14-percent stake wound up increasing in value by $253 million and it had to be accounted for in a valuation write-up. It shows in the Q1 report as a non-cash gain. So, yeah, it’s an on-paper profit but Callaway is still paying taxes on it.  

Segment-wise, Golf Equipment turned in nearly $85 million in Q1 profits. That’s up 45 percent versus last year and up 20 percent compared to Callaway’s pre-COVID 2019 numbers. Apparel, Gear and Other profits totaled nearly $20.5 million which was down seven percent from 2019 but up nearly 640 percent from last year.  

Four months of Topgolf ownership resulted in more than $92 million worth of income and nearly $4 million in profits.  

All that adds up to more than $109 million. That’s offset by a variety of costs, including asset liquidation in connection with the Jack Wolfskin and OGIO acquisitions, and $17 million in transaction costs related to the TopGolf merger.  

Callaway reported an adjusted EBITDA of $128 million, a 115-percent increase over last year. 

Q1 Financial Reports: What Does It All Mean? 

That the golf equipment business is booming may be the biggest duh statement you’ll read all week. Golf Datatech reports equipment sales industry-wide were up 72 percent compared to Q1 last year and up 49 percent compared to 2019. That’s made this past quarter the highest Q1 on record and it was the third consecutive quarter of record sales.  

Both Callaway and Acushnet (and, we presume, everyone else) are well ahead of their 2019 pre-COVID sales pace. As the old saying goes, you make your hay while the sun shines and right now the sun is as bright as it’s been since the Tiger Boom. 

Neither Acushnet nor Callaway is offering investment guidance yet but both appear to be bullish on 2021. Acushnet expects full-year sales in the $1.8- to $1.87-billion range. Callaway isn’t offering specific projections but the company does say it expects sales and EBIDTA for its legacy businesses (which excludes Topgolf) to exceed 2019 levels. The company expects the new Topgolf business segment to do likewise.  

And, just in case, Callaway has a boatload of cash and available credit on hand, to the tune of $713 million.  

Worldwide supply chain issues do lurk for both companies. Acushnet says Q1 supply chain disruptions caused shortages of various raw materials and increased freight charges. Callaway says challenges remain in supply chain, logistics and labor, but the company believes it has set itself up to meet anticipated demand.  

And both companies’ stock prices are reflecting the strong market. Callaway stock opened this morning at $32.58 per share. A year ago, it was at $11.50. Acushnet stock opened today at $51.35 per share. This time last year it was at $27.12.  

Some Topgolf Tidbits 

Obviously, the Topgolf merger is the big story for Callaway this year. As mentioned, Topgolf pulled in $92 million in just four weeks. Topgolf’s top line has grown steadily over the past five years to the tune of nearly 20 percent annually. Oddly, the bottom line has been a bit more stubborn. SEC filings show Topgolf has, in fact, yet to turn a profit.  

That’s not necessarily a sign of impending doom, as the company has been in a state of constant expansion and reinvestment over that time. In fact, two new venues opened in Q1 (Lake Mark, Fla., and Albuquerque, N.M.) and three more have opened so far this quarter (San Jose, Calif., Waco, Texas, and Buford, Ga.). Eight more are slated to open this year.  

Callaway Q4 and 2020 financials

Despite COVID, all Topgolf venues worldwide are now open, even though many have restricted capacity. Callaway reports walk-in traffic remains strong and small to medium-sized event business is picking up.  

In the big picture, Topgolf puts Callaway into a whole new corporate stratosphere. Topgolf’s annual projected revenue easily tops $1 billion. On its own, Callaway topped $1.7 billion in 2019 and it’s not a stretch to imagine the new Callaway could top $3 billion in sales, if not this year, then most certainly by next year.  

Acushnet spent years as the No. 1 company in golf. It lost the title to Callaway in 2019, only to gain it back in 2020. With the addition of Topgolf, no one will be able to challenge Callaway for the foreseeable future, barring a major sea change or key acquisition.