Q3 2022 Topgolf Callaway Brands Corp Earnings Call
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Good day.
Popcorn brands Corp, 2022 third quarter earnings Conference call.
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Is being recorded I would now like to turn the conference over to MS. Lauren Scott Director of Investor Relations. Please go ahead.
Thank you Anne and good afternoon, everyone welcome to top golf Callaway brands third quarter 2022 earnings Conference call I'm, Lauren Scott the company's director of Investor Relations joining.
Joining me as speakers on today's call are chip Brewer, our president and Chief Executive Officer, and Brian Lynch, Our Chief Financial Officer, Jennifer Thomas Our Chief Accounting Officer, and Patrick Burke Senior Vice President of Global Finance are also in the room today for Q&A.
Earlier today, the company issued a press release announcing its third quarter 2022 financial results. In addition, there was a presentation that accompanies todays prepared remarks and may make it easier for you to follow the call. This earnings presentation as well as the earnings release.
Both are available under the company's Investor Relations website under the financial results.
Most of the financial numbers reported and discussed on today's call are based on U S. Generally accepted accounting principles any instances, where we report non-GAAP measures. We have reconciled the non-GAAP measures to the corresponding GAAP measures at the back of the presentation in accordance with regulation G. Please.
Please note that this call will include forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations.
We encourage you to review the Safe Harbor statements contained in the presentation. It release for a more complete description.
And with that I would now like to turn the call over to chip for Thank you Lauren good afternoon to everyone on our call and thank you for joining us today.
I am pleased to report another quarter of record results for top golf Callaway brands.
Driven by strength across all of our segments.
Total net revenue in the third quarter was $989 million.
Up 15% year sure.
We're up 21% on a currency neutral basis, while adjusted EBITDA was $144 million.
Up 4% year over year or 23% on a currency neutral basis.
The strength of our results underscores our leadership position in the modern golf ecosystem and the positive trends, we're seeing across our business.
Highlighting by increased traffic at our top golf venues market share gains in our golf equipment business and strong brand momentum and our active lifestyle segment.
As we look to the balance of this year and into 2023.
We are optimistic about our competitive positioning across each segment.
The resiliency of our core consumers and the embedded growth within our business.
Over the long term, we believe we can deliver profitable growth across all of our segments.
As well as the competitive advantage via the scale synergies of our combined enterprise.
We remain confident that off course golf will continue to be a key driver of growth in the modern golf ecosystem.
And as our recent rebrand suggests to.
Top golf is expected to be an even larger contributor to both topline and bottomline growth.
As Youll see in the outlook section given top golf strong embedded growth we.
We see that business contributing more than half of our EBITDA in the very near future.
An impressive transformation that also demonstrates the long term advantage of our diversified modern golf portfolio.
Shifting to our segment overview I'll first start with top golfs third quarter results.
Top golf venues delivered an impressive 11% same venue sales growth in Q3.
Driven by a roughly even mix of traffic growth and price.
Social events were particularly strong contributor this quarter as the venues are increasingly gaining recognition as a preferred place to gather for group events and celebrations.
Looking forward, we believe we can deliver 10% or higher same venue sales for Q4 as well.
Delivering high single digit same venue sales for the full year.
Our strong results and expectations for the business demonstrate top golfs distinct position within them.
And underscore its ability to thrive in today's environment.
They have created a unique guest experience that makes it easier for players to engage with the sport of golf, while being entertained and socializing with friends.
We remain confident in the sustainable growth outlook for this business and we believe we have multiple levers still available to positively impact future performance.
For instance, we're continuing to rollout an enhanced digital platform.
<unk> been increasing our reservation capabilities and bay utilization.
In addition to digital enhancements top golf is also launching an exciting marketing campaign in Q4 of this year.
The campaign is intended to further increase both consumer awareness and demand.
You'll begin to see increased advertisements in select markets as early as this month with a nationwide rollout early next year.
New venue development remains on schedule with two new locations opened in Q3 and six new venues scheduled to open in Q4, the most ever in a single quarter bye.
By the end of the year, we will have 81 total owned venues worldwide and we're happy to report that our track record for new venues meeting or beating our financial targets remains outstanding.
From an enterprise perspective investing in the top golf venues continues to be our use of capital and one we remain enthusiastic about.
The business model is proven with venues to delivering an impressive 40% to 50% year three cash on cash return.
And we have a clear roadmap for the growth ahead of US as we plan to successfully opened 11, new venues a year and at the same time.
Deliver positive same venue sales growth across existing venues.
Top tracer had a good quarter as well with approximately 600 bays installed.
For the full year, we now estimate that we will install between 7% to 8000 new base.
Customer reaction to the product remains strong and we continue to view this as a great long term opportunity.
And a key source of synergy between Callaway in top golf.
Lastly, we launched a new mobile game, just last week called Shank stars.
While we have modest financial expectations for this new offering we believe there will be attractive synergies across the top golf business as we leverage the content and characters from the game to enhance the experience at our venues and top tracer ranges.
Moving to the golf equipment segment. According to golf data Tech the U S golf equipment market is down only two 3% through Q3 on a sell through dollar basis and remains up an impressive 41% compared to 2000.
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This despite relatively poor weather and playable hours in the early part of this year.
The market is clearly not declined meaningfully as many expected it too with Covid restrictions abating earlier this year and.
And we've been pleased with the fact that we gained market share as the year progressed.
After a slow start to the year, our U S hard good market share year to date through Q3 was 23, 8%.
Up 97 basis points year over year.
It's clear that interest in golf remains high and that Callaway is outperforming the market something I believe we have a track record of doing.
With all of this the profitability of our golf equipment business remains high as well.
To both protect and build on this position we've made some key investments in this business over the last several years for.
For example, we made key additions to our tour teams such as John ROM and New Women's World number 119 year old Gino physical.
As well as investing in our Callaway next pipeline of up and coming young players.
In R&D, we continue to invest in new capabilities that are establishing a leadership position in artificial intelligence capabilities in area. We believe we will be differentiating for the future.
And our supply chain, we've made significant investments for both clubs and ball, including major upgrades in our chicken ball plant.
These investments along with our scale advantage proven business model and iconic brand position put us in a strong position going forward.
We continue to see this segment as a consistent performer over the long term generating good growth and even better cash flows.
The timing of this couldn't be better as it supports the top golf development and the attractive capital deployment opportunities we see there.
Turning to our active lifestyle segment, the Callaway apparel business in Asia turned in another strong quarter as did both Travis Matthew and Jack will skin.
For Jack will skin in local currency, both China and Europe grew nicely. During Q3, we are proud of this result, as investors will note that many of our competitors are struggling in those markets.
We're also seeing excellent signs of brand health as a recent third party research study of consumer preferences showed Jack will skin to be the number one brand associated with outdoor activities in Germany and.
And the brand just earned the prestigious is spoke product award the gold standard in the outdoor industry for technical and sustainably conscious product design.
Shifting to Travis Matthew we continue to see outstanding brand momentum across all channels.
The brand is delivering strong double digit revenue and profit.
And they are experiencing another promising pre book season for spring Summer 2023.
Our active lifestyle segment remains.
Tiley profitable segment with excellent growth prospects.
Turning now to our outlook I.
I'd like to give you some color on the balance of this year and due to the level of uncertainties out there and the difficulty that investors may have in quantifying them.
And initial outlook for 2023.
For 2022, we're raising our full year profitability guidance for top golf and the total company.
Despite further FX pressures relative to our last guide.
2022 is clearly going to be another very strong year for us with positive brand momentum and growth across all segments.
Looking further forward, we like most companies are contemplating the impacts of a potential economic slowdown.
Further inflationary pressure.
And foreign exchange movements.
Looking at these in turn while we're not immune from inflationary pressures or macroeconomic conditions. Our consumers are passionate about traditional golf the top golf experience and our apparel brands.
They also generally have the means and desire to continue to enjoy these activities, even amid inflationary pressure or mild economic downturns.
We feel this is a key point of strength for our businesses.
Looking at only the FX if current rates hold it would be a meaningful headwind for us in 2023.
However, we view this as a short to midterm issue as over longer periods rates will either moderate or businesses will adjust.
Even with all of the above.
For 2023, we currently expect approximately 10% revenue growth and approximately $600 million and adjusted EBITDA with.
With top golf contributing a little more than half of this EBITDA.
This keeps us on track with our long term goals communicated at our Investor day earlier this year.
On an FX neutral basis, this would be equivalent to 13% revenue growth and approximately $665 million and adjusted EBITDA.
As FX rates and business conditions, and evidently continue to change we will provide an updated forecast as well as our normal segment information and more specific business projections on our February earnings call.
We're only providing this high level snapshot at this time.
And only doing so to assist investors in what we believe are unique circumstances.
Thank you and I'll now turn the call to Brian for a review of our financials.
Thank you and good afternoon, everyone.
As chip mentioned, we are very pleased with our performance third quarter as we delivered another period of record results.
These results include a 15% increase in revenue, while absorbing a $50 million negative impact from changes in foreign currency rates versus 2021.
Our adjusted EBITDA also increased 4%, despite the currency impact or 23% on a constant currency basis.
Our liquidity and financial position remained strong.
All of this gives us the confidence to increase our full year guidance for 2022 and supports our growth estimates for 2023.
With that brief overview I will now review the quarterly results in more detail.
For the third quarter consolidated net revenue was a record $989 million.
An increase of 15% compared to Q3, 2021, or a 21% increase on a constant currency basis.
This performance reflects increased revenue in each operating segment and in most major product categories and major regions.
Total non-GAAP costs and expenses were <unk> $907 million in the third quarter 2022, compared to $772 million in the third quarter of 2021.
The increase was driven by increased variable expenses, such as venue operating expenses.
As well as increased freight and continued investments to support the business.
Third quarter 2022, non-GAAP operating income was $81 1 million.
At year over year.
This decrease was due to changes in foreign currency rates.
On a constant currency basis.
non-GAAP operating income would have increased 27% and operating margins would've increased 40 basis points.
non-GAAP earnings per share was <unk> 23 on approximately 202 million shares compared to <unk> 14 per share on approximately 186 million shares in the third quarter of 2021.
The increased share count is primarily related to an accounting rule change that took effect on January one.
Which requires that we include $14 7 million shares related to the assumed conversion of the company's convertible notes.
Lastly, Q3, adjusted EBITDA was $144 million up 4% over Q3, 2021 or up 23% on a constant currency basis.
Now turning to the segment results.
3% increase on a constant currency basis.
Both versus Q3, 2021.
This was driven by continued high demand strong market shares and good supply in golf equipment.
As I mentioned in the Q2 earnings call predicting the timing of shipments and supply between quarters can be challenging.
During Q3, we received some supply earlier than expected.
And if you have orders and have the product you might as well ship it.
Yes.
As a result, some of the strength we experienced in the quarter was due to a shift in the timing of sales from Q4 to Q3.
Golf equipment operating income decreased 8% despite increased 8% despite the foreign currency headwinds.
Lastly, our active lifestyle segment had revenue of $278 million up 19% or 31% on a constant currency basis compared to Q3 2021.
This increase was led by momentum in the Travis Matthew Jack Wolfson and Callaway brands.
Active lifestyle operating income decreased $6 5 million in Q3 compared to Q3 2021, but on a constant currency basis would have increased.
Turning now to a certain balance sheet items.
We remain in a strong financial position with ample liquidity.
As of September 32022 available liquidity, which is comprised of cash on hand, and availability under our credit facilities with $659 million compared to $918 million at September 32021.
The decrease from last year was due to continued investment in top golf and planned working capital increases in the golf equipment and active lifestyle businesses to support growth.
On a year over year comparison, we note that last year's working capital was abnormally low due to the disruption in supply chain related to the pandemic.
We expect top golf will be cash flow positive and self funding in 2023.
At quarter end, we had total net debt of $1 75 billion, including convertible debt of approximately $259 million.
Our pro forma net debt leverage which excludes the convertible note was approximately one eight times at September 32022, compared to one eight times at September 32021.
The increase was due to the new venue development.
Consolidated net accounts receivable was $275 million as of September 32022.
Compared to $255 million at the end of the third quarter of 2021.
The increase was due to the $132 million increase in revenue.
Third for the prior period and strong cash collections.
Days sales outstanding improved by one day to 52 days in the non top golf business.
The quality of the accounts receivable remained strong.
Our inventory balance increased to $722 million at the end of the third quarter of 2022.
Compared to $385 million at the end of September 32021.
We feel good about the levels of our inventory inventory turns and days on hand are roughly consistent with pre pandemic levels.
We also feel good about the quality of our inventory and do not foresee promotional activity based on our current inventory position.
Capital expenditures for the third quarter was $66 million net.
Net of reimbursements.
This includes $48 million related to top golf.
For the full year, we expect total capex of approximately $325 million.
Again net of reimbursements.
Including approximately $250 million for top golf and $75 million for the non top golf business.
$325 million includes $165 million of growth Capex.
Now turning to our balance of the year outlook.
We are raising our full year 2022 revenue expectations to 396 5 billion to.
The $3 95 billion, including approximately $150 million of negative foreign currency impact, which is approximately $21 million more than our last estimate of $129 million.
The segment assumptions underlying this guidance are the same as our prior earnings report with top golf segment revenue of approximately 156 billion.
Golf segment revenue growth of 12% or more in active lifestyle segment revenue, reaching approximately $1 billion.
The operating segments are covering the increased negative foreign currency impacts.
Our full year adjusted EBITDA guidance of $560 to $570 million is a $5 million increase compared to the midpoint of our previous guidance.
The golf equipment business is largely expected to cover the incremental foreign exchange risks.
Top golf is now expected to deliver between $240 million to $250 million of adjusted EBITDA.
To reiterate jeffs comments for 2023, we expected business to grow approximately 10% and revenue and to achieve approximately $600 million and adjusted EBITDA.
Using currency spot rates from late October .
From a constant currency perspective that would represent approximately 13% or more revenue growth and approximately $65 million and adjusted EBITDA.
These projections include no hedge gains as our hedging program reset at the beginning of the year.
And also it takes into account the lapping of the channel filling in the golf equipment business that we had this year as retail inventory has returned to normal levels.
Given it is early to provide these metrics we are not providing segment level detail at this time.
In closing, we have managed to achieve substantial growth year to date, despite the macroeconomic headwinds, thereby demonstrating the resiliency of our core consumers as well as the benefits of scale in our diversification strategy.
We continue to be excited about the growth prospects of our business and are confident that our competitive positioning across each segment and the embedded growth within our business will keep us on track to deliver on our long term outlook and to create shareholder value.
That concludes our prepared remarks today, and we will now open the call for questions.
Operator over to you.
We will now begin the question and answer session.
Ask a question you May press Star then one on your telephone keypad, Peter using a speakerphone. Please pick up your handset before pressing the keys.
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Our first question comes from Randy <unk> with Jefferies. Please go ahead.
Yes. Thanks, guys. Thanks for taking my questions. I guess first question I want to ask you is on the pop golf business the venue revenues keep coming in above kind of our forecast.
When you factor in.
The changes that have gone on in the world around work from home stickiness people are leaving cities.
Suburbia.
And pop restaurant bars are closing.
Do you think that the maturity curve.
In the mature the volume of the top golf venues changes at all going forward for the positive versus what your prior forecast may have been in terms of underwriting. These locations can you kind of talk to that a little bit.
Sure Randy.
It's clear that top golf is building momentum.
<unk>.
It's driving both.
Price and volume increases so it's not just price we're getting.
Traffic and you have seen a steady build in momentum that brand and business.
And there is probably a lot of different trends converging that are all somewhat favorable for that business right.
Increased interest around golf in general the <unk>.
Hybrid and remote work environments the experience.
The economy et cetera, and then just the scale of the business as it builds scale and.
Awareness and momentum.
Across the country all of these things are.
Our positive for starting to see those very clearly in the data.
The other thing that is very clear.
Is that the upside of that business is well above what we under wrote.
<unk>.
Did the merger.
The upside in venue growth the upside in the profitability of the venues et cetera.
Very pleased with the trends and excited about the outlook.
Great. That's helpful and then moving to the golf equipment side of the business. One thing I asked of your competitor. This morning was I asked about his.
His view.
The cyclicality of the changes of cyclicality in the golf equipment industry now that we've seen more competitor consolidation was priced for companies that Matt and Alan on the top equipment side, but also on the rise of customization. So I just wanted to get your thoughts on your view of how the <unk>.
<unk> or lack thereof of those of the industry of golf equipment changes.
Going forward with these different changes that are happening or have happened within the industry.
Yes, that's an interesting question.
Question, Randy So I.
I don't really view that the golf equipment business as cyclical.
If you look at.
Historical results it has not been particularly sensitive to mild recessions or economic climate.
And.
The last.
Several years, a very consistent business, but like top golf a lot of favorability recently in the.
Interest around the game the sport the growth.
Clearly there was concern coming into the year, whether there would be some reversion or pullback in interest in.
Purchases and participation in the data is very clear on that there has not been.
So.
I wouldn't view that businesses.
Cyclical or and it certainly structurally changed over the many years prior to the pandemic, but.
Since then there has been some excellent tailwind that.
We've been enjoying in the.
The last thing and you already know this Randy but the.
The growth of off course, which we are the dominant player of it.
As a significant factor.
Of what's going to be going on in and around golf.
I mean.
The definition of golf needs to change, it's not just people on a golf course now its people at venues and other off course mediums and that is.
Bigger market growing exceptionally fast and.
We happen to be in a pretty strong position there.
One more I want to sneak in because you just brought up something that I think is really important. It's these other areas that are growing within the ecosystem. When you look at where can you maybe extrapolate that.
And upon your vision more view of what the ultimate and gain can be for.
Top tracer in something like Travis Matthew because when you look at those business needs. It seems to me that the growth trajectory they have created.
Equity kind of value for them that could be above the current market cap of your company today. So I just would like it if you could expand upon those younger businesses that the market pricing and focus on at this point, how they can how big you think they can be.
That may not be familiar just just kind of expand upon that a little bit more because again they feel like okay.
They have value long term that could be above the current market cap of the entire company, which is perplexing, but I just want to get your view there.
I'm not going to pine on the.
Potential valuation of any individual segment of our business, but you are correct in identifying there are some.
Amazing businesses embedded within our overall ecosystem in two of those are Travis Matthew and the.
Top tracer business Travis Matthew is.
When we bought it was $60 million ish of revenue.
We've already stated is expected to hit $300 million in revenue.
Growing.
Inefficient double digit growth across all channels just.
Being able to open new stores that payback very quickly and then drive the overall.
Growth in the various markets, where we open those stores.
And we're starting just baby steps in international and getting into the women's market, but.
It's a very exciting business it fits really well within our business and ecosystem, we will have an advantage and the reach to <unk>.
Total golfers.
And so therefore being able to leverage that top trace are similarly, a very small business right now much smaller in scale than.
<unk>.
Travis Matthew business under $100 million in revenue, but.
Really great transformational business, when we put it into ranges there revenues up significantly.
And the consumers love it we capture a ton of data it integrates with the venue business.
It's a golf specific market, we helped them open those et cetera, so exciting business that has got the potential to transform.
How people hit golf balls at driving ranges going forward I would.
Dare to guess in five Years' time, if our range doesn't have.
Digital technology like top tracer in top tracer is.
Dominant player in that space.
It's not going to be a competitive and it's not going to be a very well viewed consumer experience.
Super helpful. Thanks, guys.
Thank you Randy country.
Our next question comes from Alex Perry with Bank of America. Please go ahead.
Hi, Thanks for taking my questions and congrats on a strong quarter.
Just first could you maybe give us a little more color on the 10% revenue growth for next year sort of as golf equipment are expected to grow within that given some of the headwinds you mentioned such as lapping the channel fill this year and does the guidance contemplate current trends continuing for the consumer or some.
The slowdown in the end consumer.
Sure Alex.
Good question.
Unfortunately at this point, we're not going to provide segment specific commentary on 2023.
But I will give you some commentary on general expectations that are embedded in that.
Ah.
Preview.
And basically we are expecting continued macroeconomic pressures and inflation.
Some potential consumer pressure for.
Perhaps even a modest recession, so we're not being pollyannish within that overall.
But at this point, we're going to not break out individual segment expectations.
Uh huh.
Perfect that's really helpful and then.
This is my second question.
Top golf game revenue accelerated nicely is it fair to assume you see no significant drop off in the customer there and can you maybe give us some more color on sort of walk in traffic versus your corporate events business and the key drivers to that sort of 10% same venue sales growth for the fourth quarter.
That implies a little bit of a deceleration versus <unk>, but maybe there is not conservative.
Conservatism in there.
Well, we said, 10% or higher and we did 11, so Alex too to call that a deceleration I think youre getting a little fine tuned there but.
The same venue sales growth in Q4.
Is really expected to be across.
All.
<unk>.
Groups as it was in Q3, we saw good walk in traffic, great social events and good corporate sales in Q3.
And we see a continuation of those trends in.
Q4.
Perfect. That's really helpful best of luck going forward.
Our next question comes from Joe <unk> with Raymond James. Please go ahead.
Thanks, Hey, guys good afternoon.
Couple of questions. The first question on top golf.
No, we probably don't have a lot of data going back historically, but is there any evidence.
In terms of how that business performs.
Economic downturn or recession, I mean, it's not the cheapest form of of eating out.
No Joe it's a great question, and we think about it a lot.
Sure.
There is no. Good data is the long they're short answer to that of how it doesn't a recession it did.
The last recessions.
Yeah.
Obviously, the last one was.
A significant one.
And candidly it did fine during that but it was early concept stages and.
Yeah.
It.
It didn't I wouldn't take too much out of that one way or the other.
I would tell you that the data that we're seeing is pretty.
Encouraging though right.
Perhaps that's not the Rosie is of economic times out there right now.
Some businesses that are particularly sensitive to that are already seeing declines or declines in at least in visits.
The top golf business delivered positive.
Traffic growth as well as.
Price for pretty and is building momentum on the same venue sales side. So.
Seeing anything right now, but not no historical data like we have in the golf equipment business too.
To share with you.
Understood and maybe a second question I think it was Brian said earlier.
You guys don't expect any uptick in promotional activity.
Despite the fact that channel inventories have put a normalized here, but maybe help us understand why we wouldn't see.
At least some increase in promo.
Yes, I think Brian's comment was specific to our inventory levels and whether our inventory levels are causing would cause us to be promotional and the answer to that is no we have.
Comfort there.
The market is probably has more normalized inventory levels right now and so.
The there'll probably be more promotional activity than there was in the last couple of years.
<unk> zero by the way so more than zero.
But probably less than historical.
Promotional activity is not one of the areas that we are per say concerned about.
But to be.
Clear there may be some level of promotional activity, whereas.
In many of our businesses there was such low inventories in the field and at our.
The wholesale side of it that the.
2021.
They didn't have any so.
A little more.
Got it okay. Thanks for clarifying.
Yes. Thank you.
Our next question comes from Daniel <unk> with Stephens, Inc. Please go ahead.
Yes, Hey, good afternoon, everybody. Thanks for taking my questions.
Chip I wanted to follow up on talk a little bit different angle I mean, a common question just around financing costs I know, who havent operated this business through a downturn, but how are your discussion with your REIT partners going are you seeing cost of capital increase is that changing kind of the return profile that you are getting or that youre looking for for new locations. Just how are you thinking about.
Capital allocation and growth with the rising cost of capital environment.
Yeah. So good question, Daniel but we have not seen any.
Cost pressures on the refinancing.
Is happening is we're becoming a much more.
<unk>.
Safe and secure.
<unk>.
Person to lend money to as well so.
And there is a.
Good market out there so we have not had any.
The REIT increases as of yet.
We feel good about that market.
Yeah.
Okay. That's helpful and then one of the apparel side.
Mentioned, Jack Wolfgang grew internationally and you kind of mentioned Travis Matthew Preorders I guess on <unk> can you talk about what you think drove.
And that outperformance was a better supply chain management, what's the brand refresh you're talking about at the analyst day kind of what drove that growth and then any color on the preorders for that brand.
We look forward to our <unk>.
Kind of fourth quarter first quarter since it's more winter progress. Thanks.
Yes, it's more.
Jack will skin is really brand strength. So it's been a good category in the outdoor lifestyle category, where there is positive.
Momentum in the category at large and they have done a great job in their core markets of China and <unk>.
Germany of strengthening the brand and product line and so that has led to the performance that we've seen.
<unk>.
And what was the last question on that.
Just any color preorders you mentioned.
Matthew so.
Yeah Preorders no no real color on that the big season on that will be the fall winter season, and they are in the early days of getting there.
Pre books for that now so.
But we feel good about the momentum of the business.
Alright, thanks for the color and best of luck.
Thank you.
And then as a final reminder, if you have a question. Please press Star then one.
Our next question comes from Kevin <unk> of Jpmorgan. Please go ahead.
Hey, guys. Thanks for taking my question.
Another one on top golf I was just hoping can you elaborate on the productivity opportunity there.
The increase.
Realization at peak.
Where are you on labor or is that small constraint for you.
Just any way you can quantify kind of the opportunity there.
Near term and long term will be great. Thanks.
Without going in.
Any specifics the labor has.
Stabilized at this point during Q3, we have made a lot of great progress.
Stabilizing the labor and the venues or continue to be.
Profitable and Youll see an increase during Q4.
Yeah.
We're at or.
We have good momentum in terms of the <unk>.
Profitability of those venues and as I mentioned in my comments.
We see more levers to pull that will continue to grow those the profitability of the venues were not.
I think at our Investor day, we talked about 32% or something EBITDAR margins and we're very confident in those and probably believe there's more upside than that.
Thanks Raj to ask a quick follow up on the golf ball business.
Sure.
Pretty linear increase over the past decade.
What's your view on on the path for the next five or 10 points of share.
Where might that come from that.
Challenging in the last five or 10.
And then maybe more broadly how does.
So think about what you guys embedded as far as maybe consumables versus bigger ticket purchases like clubs.
In a more challenging macro backdrop. Thanks.
Sure, yes, thanks for noticing on the golf ball, we're very proud of the.
Steady progression, we have had in that business and growth of that over.
Many years now.
Really and we've made during that time, some significant investments in our.
Manufacturing facilities will allow us to make a really unique product both now and going forward and we think that is what will help us unlock those next.
Several points of market share gain which we intend to deliver.
But a lot of the playbook as what you've seen us pulling over the last several years continuing to strengthen distribution.
Continuing to make big investments back, which we think we're largely through now.
To be able to build a better product and differentiate in that factor.
And then we're getting some of the best players in the World.
Geopolitical.
The golf ball this year on our way to number one in the world.
<unk> performance.
<unk> of it.
Is it not.
Not repeatable now so.
Continuing this playbook I think will hopefully deliver the similar results that we have.
<unk> been able to deliver over the last several years.
Okay.
Yes, Thanks Shlomo.
And our next question comes from Casey Alexander of Compass Point Research and trading. Please go ahead.
Hi, Good afternoon forgive me. If this is already in there, but I came to the call late and we've had a bunch of companies report this afternoon.
My only question was one area, where top golf still seem to have some same store slack that they can pick up.
In some of the event driven business that a lot of it falls in the fourth quarter. So I'm just wondering how your bookings for the event business for top golfer looking coming into this holiday season as compared to last year.
Thanks, Casey good question.
There are two types of events that we track social events, which have been just killing it and.
Continue to do so and then corporate events, which were.
The slowest to come back.
Post pandemic.
They were up last quarter.
And we see very good trends going forward, we expect them to be up.
Nicely over last year and also over a little bit over 2019 levels, we have pretty good visibility on that now Casey as you would expect it's already November .
And.
They book those out a little bit in advance so we feel good on corporate as well as the rest of that business.
Alright, great. Thank you for taking my question I appreciate it.
Yes. Thank you.
Our next question comes from.
Our next question comes from John Kernan Cowen <unk> Company. Please go ahead.
Excellent. Thank you for taking my question good afternoon.
Hey, Joe Hey, Jon Brian .
Alright, thank you.
Ex FX business would be $660 million.
EBITDA run rate, which I think is.
It's certainly above the plan you laid out when you underwrote.
Transaction, we've topped off and.
The Investor day.
Alright.
April .
When you talk to what's driving the upside versus the <unk>.
Lan.
<unk> been pretty consistent upside in your guidance for.
Since you did the transaction.
Sure John Thanks for noticing our outperformance, but it's really across the board all three.
The segments are performing above what we expected as chip mentioned earlier top golf has been on a tear and were well ahead of where we expect it to be but the golf equipment business is performing.
The Travis Matthew Jack Wiltgen.
It's all it's all really doing very well.
Yeah.
Got it and then any any thoughts on openings.
For top golf venue openings in 2023.
Yes no.
Same as we've been saying John 11 venues and.
We feel good about the pipeline.
And then just on international any thoughts on top golf internationally and performance.
A slow ramp there so we are.
We opened.
Several this year.
Have several more in the works we have one late this quarter, which is an owned venue in Glasgow.
Then on the franchise side.
Several in the works and we expect that to ramp up but it will really ramp more in 'twenty four 'twenty five in 'twenty three.
Got it thank you.
Thank you Jeff.
At this time it appears that there are no further questions I'll now turn the call back to Mr. Chip Brewer for any closing remarks.
Alright, well I want to thank everybody for joining us, but I also like to.
At the risk of being redundant summarize what I hope are a few key takeaways from today's call.
First is I think that it's clear top golf Callaway brand.
Phenomenal 2022, we're delivering growth in all segments.
There's been continued strength in traditional golf markets, which have not gone backwards as some feared might happen as well as our position in it and we have gained share.
The top golf venue business is building momentum as evidenced by the same venue sales trends as well as new venue openings and thats transforming our business even faster than we originally projected.
We now expect it to be more than half of our EBITDA next year and the venue business is continuing to prove itself as a bigger and better business than all previous expectations.
To put some numbers behind that in 2019 top golf did just under $60 million and adjusted EBITDA.
We're forecasting $240 million to $250 million for 2022 and more than $300 million in 2023.
If investors are still thinking of a similar to how they did historically.
We believe they are missing the big picture.
We remain excited about the future prospects of this unique and exciting business.
Thanks for joining our call today best of wishes for the rest of this year and the holidays. We look forward to speaking to you again in February .
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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