Topgolf Callaway and Acushnet Q1 2024 Financial Reports

• Topgolf Callaway Q1 sales: $1.133 billion – down two percent from last year.
• Net profit of $7 million is down 75 percent. EBITDA is up slightly.
• Acushnet Q1 sales top $707 million, up over three percent.
• Net profit of nearly $88 million, down nearly six percent.

The Topgolf Callaway and Acushnet Q1 2024 financial reports came out this week. Before you go wailing and moaning that the end is near or proclaiming, “these OEMs can’t keep charging these prices,” remember the words of Michael Corleone.

“It’s not personal. It’s just business.”

Both Acushnet and Topgolf Callaway make their money from golf but they go about it differently. And while top-line sales and bottom-line profits tell one story, how each company arrives at those lines is another one entirely.

But before we jump into the numbers, please indulge us as we share our standard disclaimer:

We are not nor do we claim to be financial experts, investment counselors or Wall Street-level business analysts (we do understand that some of you reading this might be one or all of those -we welcome your input). We’re simply golf industry geeks who like to read.

Good. With that out of the way, let’s dive in.

Topgolf Callaway Q1 Results

Topgolf Callaway’s quarterly report headlines have been a little odd over the past year. Headlines have been understated, focusing on operational efficiencies rather than numbers. This year’s Q1 report isn’t exactly the financial version of The Empire Strikes Back but it does paint an interesting picture.

The company reports Q1 Sales of $1.144 BILLION. That’s a big number and Topgolf Callaway says it’s right in line with expectations.

It’s also down two percent from last year’s Q1 results.

Surprisingly, Topgolf Callaway is reporting only a $7-million quarterly profit on that $1.144 billion in sales. That’s down 75 percent from last year’s $25-million Q1 profit. Also in the headlines: Topgolf same-venue sales were down seven percent in Q1.

All of that, according to the report, was “in line with expectations.”

Before you start with “that’s what you get for selling $600 drivers,” we do need to dig deeper.

The company says the drop in sales was expected due to a 15 percent drop in Active Lifestyle sales which was offset by a five-percent increase in Topgolf sales (due to new venues) and a 1.4-percent increase in golf equipment sales (due to the new Chrome Tour golf balls).

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was in line with company projections, up nearly 2.3 percent to nearly $161 million. That number matters.

Segment Numbers Tell the Tale

Topgolf Callaway is made up of three business units: Topgolf, Golf Equipment and Active Lifestyle, which is apparel and other soft goods. Over the past two years, all three business units have topped $1 billion in annual sales. But for Q1, Active Lifestyle was the problem child with sales down more than 15 percent from last year to $271.5 million.

There were two main culprits. First, Jack Wolfskin sales in Europe were down $45 million for the quarter. The company blames a triple whammy of a soft European market, too much inventory and unfavorable exchange rates. Additionally, there was significant TravisMathew movement last year as the company opened several new TravisMathew-branded outlets.

 The Golf Equipment division sales hit nearly $405 million, up 1.4 percent from last year. That’s up nearly three percent in constant currency, which normalizes foreign currency exchange rates year to year. Broken down further, club sales were $346 million (down very slightly from last year) and ball sales jumped over 12 percent to $104 million. Topgolf Callaway says that’s almost entirely due to the new Chrome Tour line. Citing Golf Datatech numbers, the company says it’s now at an 11-percent market share in the premium ball category, its highest share to date.

The company also says its new Ai Smoke line is the market share leader in drivers, irons and fairway woods while Odyssey remains No. 1 in putter market share.

What About Topgolf?

Topgolf remains the cash cow of the company’s three business units with Q1 sales reaching nearly $423 million. That’s up nearly five percent from last year. It’s also an increase driven exclusively by new venues that have been opened since Q2 of last year. Same venue sales are down seven percent year over year.

The company says that was expected, citing a post-COVID surge in corporate events last year combined with crappy weather in much of the country this past January. Topgolf Callaway took a bit of a Wall Street haymaker last fall when it released its Q3 financials. It reported an unexpected dip in same-venue Topgolf sales and Topgolf Callaway stock dropped 18 percent in one day, bottoming out at $10.05 a share. As of this writing, the share price is $15.25.

Topgolf showed a $100,000 increase in operating income for Q1 but also a nearly 25-percent increase in Adjusted EBITDA. As mentioned, EBITDA is a number investors often look at to determine the efficiency of a sales organization. It reflects net income from sales versus all the costs a company incurs to generate those sales. After that, the finance department takes over, factoring in interest and income tax expenses, non-cash depreciation and amortization costs, non-cash stock compensation, lease expenses and other things the sales, marketing and manufacturing divisions can’t control.

The company is going to great lengths to assure investors that its overall EBITDA is on target at nearly $161 million for the quarter. It’s especially assuring investors that Topgolf EBITDA is on target.

We’ll talk more about that later.

Acushnet Q1 2024 Financials

Acushnet’s financial reports are the Joe Friday of golf.

Just the facts, ma’am.

Acushnet is reporting $707.6 million in Q1 net sales, a 3.1-percent increase over last year. What’s more, it’s reporting nearly $88 million in profit but that’s down nearly six percent from last year. Adjusted EBITDA, however, was $153.7 million, up nearly five percent year-over-year.

Talk about contrasts. Acushnet delivers nearly $154 million in EBITDA on $707 million in sales while Topgolf Callaway shows $161 million in EBITDA on $1.144 billion. Like we said, they’re different companies.

Acushnet says its growth was fueled by an eight-percent increase in golf ball sales and a nearly 13-percent increase in golf club sales. For the quarter, ball sales topped $208 million, fueled by higher volumes for the Pro V1 line and new AVX, Tour Soft and TruFeel models launched in Q1. Club sales reached $204 million, paced by the new Vokey SM10 wedges and T-Series irons. Sales for TSR metal woods, now in their second model year, were down.

Titleist Golf Gear sales were up slightly, largely due to the full integration of Club Glove into the business unit on Jan. 1.

FootJoy Struggles

The FootJoy division was Acushnet’s problem child in Q1. Sales topped $193 million, down more than six percent compared to last year. Acushnet says sales volumes were down across all FootJoy product categories. Higher average apparel selling prices partially offset that drop.

MyGolfSpy has heard from multiple sources that the footwear market, in general, is down this year and that there’s considerable inventory in the marketplace.

The U.S. remains Acushnet’s biggest market. Domestic sales in Q1 topped $418 million, up 14 percent over last year. However, sales in Japan and Korea were down by double-digit percentages.

Like Topgolf Callaway, Acushnet showed Q1 profits down compared to last year, although $88 million in profits for one quarter is nothing to sneeze at. But also like Topgolf Callaway, EBITDA puts it into context. Acushnet’s Adjusted EBITDA is up five percent over last year. The company experienced big jumps in interest and tax expenses, along with restructuring costs due to manufacturing changes and IT system updates.

Acushnet Tidbits

Acushnet does provide interesting tidbits in its PowerPoint presentation to investors. For instance, the company believes golf remains on solid footing with U.S. rounds played up seven percent in Q1. Additionally, the company says channel inventories (i.e., retail store stock) is in appropriate shape for the year, with no serious equipment overages or shortages.

The company will roll out some new initiatives as its fitting network gears up for the Q2 selling season. There will be a Pro V1 loyalty program and the FootJoy FitLab performance fitting experience, allowing golfers the opportunity to be properly fitted for shoes.

You can expect the new cycle of drivers and fairway woods to come out in the second half of the year. We also found an under-the-radar announcement that Acushnet is starting a five-year, $120-million capital investment in golf ball manufacturing.

What Do These Reports Tell Us?

We can glean a few things from this round of financials. First, the golf equipment boom is likely slowing down a little. After COVID, the newbies bought their gear and the rest of us upgraded, so it would appear the buying frenzy has slowed. The fact that both companies reported healthy growth in ball sales, however, indicates that participation is still strong.

While the top-line numbers indicate a big gap between golf’s two biggest players, a different lens paints a different picture. Take Topgolf out of the equation and the two companies are closer than you’d think in sales. Callaway Golf Equipment and Active Lifestyle Q1 sales topped $721 million, compared to Acushnet’s $707.6 million.

But for now, at least, Topgolf is part of the equation. After opening 11 new venues last year, Topgolf is planning on seven more this year. The company took over the Big Shots facility in Texas in January and it opened new facilities in Durham, N.C., and just outside Los Angeles in the past few weeks. Four more should open by Q4.

TopGolf Callaway and Acushnet Q1 2024 Financial Reports: Final Thoughts

We don’t know if it means anything but Topgolf Callaway’s Q1 financial report broke out three Topgolf-specific charts, including two for EBITDA reconciliation and one for a Topgolf-specific 2024 financial outlook. Rumors are just that but in March a South Korean newspaper reported Topgolf Callaway may be in for a split.

The Chosun Daily reported that Topgolf Callaway’s three largest investors were looking to sell. The reported plan would be to spin off the Topgolf business and then sell the Callaway golf and apparel business. Topgolf Callaway officials in Carlsbad issued a denial of sorts.

“We confirm that we are not aware of any such discussions.”

OK …

This week’s Q1 report was worded in such a way as to make sure there were no “unexpected” results. Topgolf Callaway’s outlook for the rest of this year was downgraded very slightly, by roughly $80 million in lower top-line sales. For a $4-billion company, that’s chump change. If you tell investors now, it’s an explanation. If you tell them after the fact, it’s an excuse. Wall Street doesn’t like excuses.

Acushnet, on the other hand, is reaffirming its 2024 outlook. Sales are expected to be in the $2.45-billion to $2.5-billion range.