Q4 2022 Topgolf Callaway Brands Corp Earnings Call
Speaker 3: And.
Speaker 4: I bus P.
Speaker 5: Good day and welcome to the Top Golf Calibre Brands Fourth Quarter in full year 2022 earnings conference call.
Speaker 6: Participants will be in listen only mode.
Speaker 7: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker 8: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press a star and then one on your telephone keypad. And to withdraw your question, please press star then two.
Speaker 9: Please note this event is being recorded. I would now like to turn the conference over to Lauren Scott, Director of Investor Relations. Please go ahead.
Speaker 10: Thank you, operator, and good afternoon, everyone. Welcome to Topgolf Callaway Brands' fourth quarter in the full year 2022 earnings conference call. I'm Lauren Scott, the company's director of investor relations.
Speaker 11: Joining me as speakers on today's call are Chip Brewer, our President and Chief Executive Officer.
Speaker 12: and Brian Lynch, Archie Financial Officer. Jennifer Thomas, Archie at the County Officer and Patrick Burke, our Senior Vice President of Global Finance, are also in the room today for Q&A.
Speaker 13: Earlier today, the company issued a press release announcing its fourth quarter and full year 2022 financial result.
Speaker 14: In addition, there's a presentation that accompanies today's PrepareGermarks and may make it easier for you to follow the call. This earnings presentation, as well as the earnings press release, are both available on the company's investor relations website under the Financial Revolves tab.
Speaker 15: Most of the financial numbers reported and discussed today's call are based on US generally accepted accounting principle.
Speaker 16: In the 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 and according to the regulation G.
Speaker 17: 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.
Speaker 18: We encourage you to review the safe harbor statements contained in the presentation and the press release for more complete description.
Speaker 19: Lastly, to make sure we can accommodate questions from each of our analysts, we ask the you And with that, I would now like to turn the call over to TickRex. Thank you, Lauren. Good afternoon to everyone on our call and thank you for joining us today.
Speaker 20: 2022 was a very strong year for Topcuff Cadillac brands and for the sport of golf more broadly.
Speaker 21: Their modern golf ecosystem, which is comprised of both on- and off-course golf, had another record year.
Speaker 22: According to the National Golf Foundation, for the first time, U.S. golf participation exceeded 41 million people.
Speaker 23: up from 37.5 million people in 2021.
Speaker 24: On Course Golf grew by just over 500,000 participants.
Speaker 25: An excellent result coming off of strong performances in the last two years.
Speaker 26: At the same time, off-course golf increased by 3.1 million participants.
Speaker 27: and is now larger than on core scoff.
Speaker 28: with our increased venue count and same venue sales growth.
Speaker 29: We believe the off-course golf growth was largely driven by top golf.
Speaker 30: End.
Speaker 31: This is a growth trend that we have a high degree of certainty will continue.
Speaker 32: as our venue growth alone should add approximately 3 to 4 million new unique off course visitors annually.
With this, we can now clearly foresee a pattern of structural growth for the modern golf ecosystem.
with top golf Calaway brands positioned squarely at the center of it.
Now, looking at our financial results.
The full year 2022 revenue was just under $4 billion.
and full-year Adjusted Evidah was 558 million.
Up 22% and 25% year-over-year on a 12-month or full calendar year basis.
We are very pleased with these results and I'd like to thank the entire Topgolf Callaway Brands team for helping us deliver them.
Turning to the fourth quarter, we had a strong quarter, but a rare miss relative to our quarterly guidance.
This was due to both more aggressive internal forecasting.
combined with some short-term volatility in weather and expense timing.
We see no change in major trends, our earnings potential, or the health of our consumers.
We continue to take a long-term view in assessing our performance and feel very good about the trajectory of our business.
We remain on track or ahead of our long-term financial targets.
We also have increased conviction that our unique collection of brands provides us a competitive advantage in the modern golf ecosystem.
Shift into our segment overview, I'll first start with top golf results.
2022 is an outstanding year for Topgolf.
And I'd like to thank the entire Topgolf team.
especially all the playmakers at the venues for making this possible.
We delivered over 1.5 billion in revenue and 235 million in a justative at the growth of 26% and 31% respectively on a 12-month or full calendar year basis. This growth was driven by strong same venue sales growth.
up 7% for the year compared to 2019.
continued excellence in opening new venues and improved venue operating margins.
Most importantly, based on what we learned in 2022, we have more confidence and believe there's a bigger opportunity for this business than we did a year ago.
As we enter 2023, we have ongoing brand momentum and the Topgolf consumer continues to be engaged and strong.
During the fourth quarter, compared to 2019,
Same venue sales grew by 11% with traffic up 7%.
The trends in the event business remain strong, including in corporate events.
These quarterly growth rates, while good, were a little below our internal forecast as the business was impacted by venue closures due to extreme cold weather during our peak holiday season in late December .
Also during the quarter we open six new venues for total of 11 new venues in 2022.
We finished the year with 81 owned and operated venues and five franchise venues.
Two new venues of NOPE are the Boise and Wichita venues, both excellent examples of a new size and format focused on a small to mid-size markets.
This new model is a more cost effective way to serve our 50-72-day markets.
And one we believe can unlock additional markets for expansion and ultimately increases the total address of the US from 200 venues to 250 venues.
Looking ahead, we expect to open 11 new owned and operated venues again this year.
The mix will be similar in size the last year.
skewing large to medium and like last year it will be back and loaded with only two venues planned to open in the first half of this year and eight planned to open in Q4.
The growth and operational improvement in issues that already spoke about at our investor day remain on track, the most impactful being the digital day management platform.
a proprietary system we internally call Pi.
This new platform is essentially an inventory management system.
that will help our venue operations team utilize the bays more efficiently and also allows for a more advanced reservation system.
We believe this system will improve the guest experience.
and also increase profitability.
It also builds a stronger digital relationship between top-golf and the consumer.
At the time of the merger, 10% of the top-down business was digital.
Now it is 30%, but it should be more than half, and this digital platform is key to getting us there.
The Pi system was in 18 venues as of the end of 2022.
We expect to have it in all venues by the end of 2023.
We also continue to make strides on the international front. A significant milestone will be this spring's opening of China's first top-down venue, located in the interior city of Chengdu.
This will be a massive 104 bay facility built owned and operated by our national franchisee there.
As you'd expect, China represents a massive long-term opportunity for top golf. And as both we and our franchisee are excited to get our first venue up and running.
Top Tracer opened a little more than 2,300 base for the quarter, delivering just over 7,000 for the year.
On the technology front, Top Tracer continues to innovate and recently unveiled a new product specifically designed to elevate the golf coaching profession through an immersive, data-driven experience.
Top Tracer is also gaining recognition as the number one product in driving range tracking technology and recently entered into a partnership naming us the official range tracking technology of the PJ of America.
We believe this partnership will further strengthen our U.S. greengrass pipeline for this business.
Moving to the golf equipment segment, the core golf consumer remains strong and engaged throughout the year.
For the full year, our global Golf Equipment Segment revenue is up 14% year-over-year or 20% currency neutral.
Focusing on the US, our golf equipment revenues were up 17% year over year.
thus outperforming US hard goods shipments.
which were up 9% according to the National Golf Foundation.
Clearly, a strong year for the industry and an even stronger year for Calaway Golf.
And although I quote US metrics here for convenience.
Korea had particularly strong years, though partly masked by currency headwinds.
A new record.
And our golf ball sales eclipse 300 million for the first time in our history.
Our US Club Market share was also up finishing the year at 24.3%.
Looking forward to 2023 from a marketing and innovation standpoint.
The new Paradigm family of clubs represents a complete shift in performance.
and has been extremely well received both in the marketplace and on tour.
Paradigm is a full line of product. Driver, fairy woods, hybrids and irons.
as well as a new version of our jailbreak technology and an AI design face. On tour, the Paradigm driver has had an amazing start, winning four out of the first five PGA Tour events of the calendar year. At Callaway, we talk about product that's demonstrably superior and pleasingly different, and the entire Paradigm line is a great example of this. In conjunction with the launch of the new products, we also announced new partnerships with Good Good Golf, an engaging and inclusive golf content platform.
and Nile Horan, a famed singer, songwriter, and avid golfer.
as well as a multi-year extended partnership with Stephen Curry.
These partnerships underscore our interest in broadening our reach within the modern golf ecosystem.
and engaging with golfers of all levels.
Turning to the Active Lifestyle segment, we're pleased to report that the segments of past are $1 billion revenue goal for the year.
This milestone was driven in large part by Travis Matthews increased scale, continued and need will met him and increase profitability.
Travis Matthew delivered excellent results across all channels including key wholesale partnerships, greengrass pro shops, e-commerce, and our own retail stores.
Focusing on our own stores for a moment, during 2022, Travis Matthew opened 11 new retail stores and delivered double-digit, same-store sales growth for existing stores.
In 2023, we plan to open another nine stores for a total of 50 by year-end.
Well, we don't plan to provide financial detail by brand on a regular basis.
We are happy to announce that the brand also exceeded the 300 million revenue and 50 million dollar adjusted IBITDA targets shared at our investor day.
The momentum and growth prospects for Travis Matthew remain strong.
The Cattleway granted a pair on performance gear business also had outstanding years globally.
Jack Wolfskin had a challenging end of the year with COVID-related shutdowns in China as well as consumer softness and unfavorable weather in Europe .
Although the business is a smaller part of the total Topgolf Callaway brand story, we feel good about this business's market positioning as well as what we believe are improving trends in both brand and product.
belief that is supported by recent industry awards and recognition at both Europe and US trade shows.
With this, we remain optimistic about the long-term potential of this business.
Turning that or our outlook for 2023, we're updating and expanding upon our previously disclosed guidance.
For the full year of 2023, we now estimate revenues will be approximately $4.45 billion, up approximately 10-12%.
and an adjusted EBITDA will increase approximately 11 to 15% to 620 to 640 million.
On a segment basis, our full year outlook assumes
continued success at Topgolf with approximately $1.9 billion of segment revenue and approximately 300 to 320 million in adjusted EBITDA.
With this forecast, it's worth noting that top-dolph is now forecast to account for approximately half of our total company, Adjusted Ibit.
As mentioned, the top-golf consumer and brand momentum remain strong.
As a result, we're projecting a high single digit, same venue sales growth for 2023 compared to 2022.
with about a third of the growth coming from traffic.
and two-thirds from ticket or price.
For Q1, the same venue sales growth is expected to be higher than that of the full year due to the impact of Omicron in Q1 of last year.
Our golf equipment segment renders are expected to be approximately flat relative to 2022.
We feel very good about our relative position and competitiveness in this segment.
However, in our forecasting, we are also taking into account the inventory catch-up that occurred in 2022, some potential economic pressures, and more competitor launches this year versus last.
And lastly, active lifestyle should continue to grow at a low teens rate compared to 2022.
with Travis Mathew continuing to grow at a faster rate than the segment at large.
Additionally, we want to emphasize that 2023 is expected to be a significant year for the business. As we transition to being cash flow positive,
for both our parent company, Topgolf Cateway Brands, and the Topgolf Division itself.
Our overall legacy business remains strong.
Plus, we made a big bet on top golf that's paying off faster than expected and should continue to ramp from here.
With this, we have continued to strengthen our earnings and expand the growth potential of this unique business.
even in the face of macroeconomic and foreign exchange headwinds.
And we remain on plan or head of the 2025 $800 million adjusted EBITDA target laid out during our investor day.
Now, I'd like to turn the call to Brian to discuss the financials in more detail, and as a native son of Philly, I'd also like to add, go Eagles!
Thank you Chip. Good afternoon everyone.
We are very pleased with our results for 2022.
The first full year following the merger with Topgoth.
It has been exciting to see the transformation of our business, both financially and culturally, as we collectively work to expand our reach and tap into the structural growth taking place within the modern golf ecosystem.
My remarks today will be focused more on our fourth quarter performance and forward-looking guidance, but I want to start with a few key highlights from the full year.
During 2022, we generated record net revenue of $3.996 billion.
A year-over-year increase of 28%, or 32% on a constant currency basis.
driven by broad-based strength across each of our operating segments.
This sales growth is despite a $148 million negative impact from changes in foreign currency exchange rates.
Full year non-gap operating income increased 42,297 million dollars.
An increase of 16% year over year.
This metric was heavily impacted from changes in foreign currency rates during the latter part of last year.
on a constant currency basis.
Operating income increased 44% and operating margins increased 74 basis points compared to 2021.
Lastly, full-year Adjusted E-Budalus $558 million, an increase of 25% or 42% constant appeared with the In 2021 a
This is on track or ahead of our goal of 800 million in EBITDA by 2025.
With that brief overview, I will now review the quarterly results in more detail.
For the fourth quarter, net revenue was $851 million, and increases 20% compared to Q4 2021 or 25% constant currency.
This performance reflects increased revenue across each operating segment, product category, and region.
Our fourth quarter 2022 non-gap seasonal operating loss was $25 million, a 42% improvement compared to Q4 2021 due to the strong revenue growth.
As a reminder, we have historically recognized the loss in Q4 due to the seasonality of our business.
On a constant currency basis, non-GAAP income from operations would have increased 73%, and operating income as a percent of sales would have improved 476 basis points compared to fourth quarter 2021.
non-GAAP loss per share was 27 cents on 185 million shares, compared to 19 cents per share on 186 million shares in the fourth quarter of 2021.
Please note that a fully diluted share count, which includes shares associated with our convertible notes, only applies to periods with net income, and therefore a basic share count was used for Q4.
Q4, Justin DeBudallus $37 million, up 156% over Q4 2021, we're up 250% on a constant currency
At the segment level, Topgoth contributed 410 million in revenue in the quarter, a 22% increase over 2021, reflecting strong same venue sales growth and additional new venues.
Adjusted EBITDA for TopicOff was $43 million, down $3 million compared to Q4 2021, due primarily to higher preopening and marketing expenses.
Got the equipment capped off a very strong year with Q4 revenue of $190 million and 18% increase over Q4 2021 or a 25% increase on a constant currency basis.
Segment operating income increased 103% to 700,000 of income compared to a $25 million seasonal loss in Q4 2021.
As pricing and volume benefits, more than offset higher input costs and foreign currency headwinds.
Last year, our active lifestyle segment had revenue of $252 million, up 17% or 28% on a constant currency basis compared to Q4 2021.
Segment operating income increased to approximately 2 million year over year to approximately break even.
This increase was led by continued momentum in the Travis Matthew and Calaway brands.
There were partially all set by macroeconomic issues facing Europe and China, Jack Wolfgang's largest markets.
Starting to certain balance sheet items, we remain in a strong financial position with ample liquidity.
At December 31, 2022, available liquidity, which is comprised of cash on hand and availability under our credit facilities.
was $415 million compared to $753 million at December 31, 2021.
The decrease from last year was due to continued investment in Topgolf and working capital increases in the golf equipment and active lifestyle businesses, which will support our growth this year.
When a year over year comparison, we note that last year's working capital was abnormally low due to the disruptions and supply chain related to the pandemic.
At quarter end, we had total net debt of $1.88 billion, excluding the convertible debt of approximately $258 million.
Compared to 1.12 billion at the end of last year.
This increase relates primarily to incremental new venue financing and higher working capital.
Our net debt leverage, which excludes the convertible note, was approximately 3.4 times at December 31, 2022, compared to 2.5 times at December 31, 2021.
The increase was due to the new vendor development and increases in working capital.
Consolidated net accounts receivable is $167 million as of December 31, 2022.
compared to $105 million at the end of the fourth quarter of 2021.
The increase was due to higher revenues in our Gopfe equipment and active lifestyle businesses compared to Q4 2021.
Our inventory balance increased $959 million at the end of the fourth quarter of 2022 compared to $534 million at December 31, 2021.
Days inventory on hand are only slightly higher than pre-pandemic levels due to receiving the launch inventory earlier than normal.
Also, please remember that 2021 was abnormally low.
Overall, we feel good about our inventory levels and expect inventory levels to normalize by the end of the year.
Capital expenditures for the full year were $357 million net-event you financing reimbursements.
This includes $281 million related to top-cops for the full year.
Topcoff CapEx was higher than originally forecasted due to the timing of venue financing reimbursements.
For the same reason, 2023 Topgolf CapEx is expected to be lower than approximately $175 million net and venue financing reimbursements.
Total company cat-backs for 4-year 2023 is expected to be approximately 255 million, which includes $80 million of cat-backs for the non-top-cough business.
Now turning to our 2023 outlook, our estimates are based upon foreign currency exchange rates as of the end of December 2022 and early January 2023, which is when we implemented our hedging program for 2023.
For the full year, we estimate net revenues will increase surprisingly 10% to 12%, to be within the range of 4.415 billion to 4.470 billion dollars.
Topped off segment revenue is expected to be approximately $1.9 billion, driven by new venue development and same venue sales growth.
The off equipment is expected to be approximately flat year over year and active lifestyle should increase it a low teens percent compared to 2022.
The total company revenue estimate includes a $15 million negative foreign currency impact.
We've fixed full year 2023 adjusted EBITDA will increase in approximately 11% to 15% to be within a range of 620 million to $640 million, with top-gobb generating approximately half of that adjusted EBITDA.
The total company EBITDA estimate includes a 20 million dollar negative FX impact.
For the first quarter of 2023, we expect net revenue will increase approximately 9 to 11 percent to be within the range of $1.135 billion to $1.155 billion.
We expect Top Cop segment revenue of just under $400 million, driven by same-venue sales growth and the revenue benefit from Top Cop venues recently opened in Q4.
The total company revenue estimates include a $30 million negative foreign currency impact. We expect Q1 to just should even die to be within the range of $135 to $145 million. The total company revenue estimates include a $40 million negative foreign currency impact. We expect Q1 to just should even die to be within the range of $20 million.
which is below Q1 2022 of $170 million.
The decrease is driven primarily by the impact of foreign currency, which we expect to have a $25 million dollar negative impact on ABDOT for the first quarter.
The top-gop segment adjusted EBITDA and the quarter will be slightly below the 42 million we generated last year, driven by higher marketing expenditures and a return to full staffing in the venues.
The first quarter for the company will also be impacted by the full year impact of corporate investments we made.
during 2022 to support our larger business.
want to note that we are an inflection point in our business where we expect that those to total company and the top-up business will be cash flow positive in 2023 a year ahead of plan at the time of the merger.
We are proud of our results for 2022 and very grateful to the team of employees around the world who helped deliver them.
We remain excited about the growth prospects of our business and our confidence that our competitive positioning across each segment and the embedded growth within our business.
We'll keep this on track to deliver on our long-term outlook and to create meaningful shareholder value.
All right, thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause for a moment to assemble our roster. Our first question today will come from Randall Kohnick of Jeffries. Please go ahead.
the golf equipment industry. Just want to get your perspective chip on just how you think about industry inventory levels in the channel, sell in versus sell through, and then how you think about placing power.
in the year ahead or a couple years ahead. Just want to get your thoughts there on the industry of golf equipment first. Thanks.
Sure, Randy. So, you know, the golf equipment business remained healthy, which is clearly demonstrated in our results. And, you know, although there's been, you know, various periods of time with conversation of potential reversions or things like that.
The business has had an excellent year. We've outperformed the business, but the market itself has remained strong. The Delfi equipment consumer remains engaged. Participation stats show growth. So we're at least with that.
Inventory largely caught up last year. So if you look at months of supply in the field, they're at normal levels, levels consistent with where it would have been in 2018, 2019. So that...
normalization did occur during 2022. And then your last question, Randy, was around pricing power. And, you know, our consumer in the golf equipment businesses...
Kindly not that sensitive to price. They really, you know, we really compete more around product that's pleasingly different to a monsterly superior. Nobody has to have a new driver. We're really able to deliver product that...
You know, makes the game more enjoyable for them. Hopefully delivers advantages and is part of the joy of the games because buying new equipment in itself is a fun ride-a-passage for spring, et cetera. The consumers are passionate, they're engaged.
We feel good about our appracing power and have been able to demonstrate that over long period of time.
I am waiting for my paradigm driver in a couple weeks, so money will spend. The second topic, or is it my last one here, is just more on topcops. When you look at the Sincere Sales numbers of over 10%, and you're guiding to high single digit, I believe in 2023, you broke it down between traffic and price.
When you think about those numbers, they seem to be much stronger than what the economic model was thought of a few years ago with a low or very minimal up-single, low-single did you kind of comp growth.
for these businesses as a, you know, get out of the honeymoon phase, if you will. So I guess my question to you is, you think the...
The store volume numbers you gave last year at the analyst day For a small medium large what-have-you venue are those kind of just not obsolete but kind of have up now have upside To where they should be on a more mature Basis given what you've seen
And then the other thing I wanted to ask about is you talk about, I think I'm in your remarks, about these smaller venues where you've seen a better costing to build. It almost feels like you can get more density with these units, i.e. could have more units.
in the United States and you may think or maybe have given us, again, last year at the analyst day. So I just want to get your thoughts on how you think about that, the venue maturity curve or the top end of it, and then long-term kind of unit density or unit opportunity for Topgall.
Sure, Randy, yeah, there's a lot there. Let me take some of it in course here. So, you know, first of all, yeah, there are expectations or the results we're delivering on same venue sales we're very proud of. That was something that we had to solve when we at the time of the merger and the team at Topgolf. I just.
more profitable long-term opportunity than what we had originally expected as we are demonstrating our ability to drive a track of traffic price, same venue sales growth, and open venue successfully.
The store volume numbers do have upside relative to what we presented at the investor day. As our, you know, I was looking back in preparation for the earnings call and I think our initial expectation was low single digit same venue sales growth for last year. So, you know, obviously.
So I just want to tell you really how the
They will unlock more markets for us, more mid to small markets specifically. We think they're great consumer experiences.
And, you know, when we talked about US initially, we talked about 200 in TAM for venue count, and we now believe that is 250.
Super helpful. Thanks guys.
Thank you, Randy.
And our next question today will come from Alex Perry of Bank of America. Please go ahead.
Hi, thanks for taking my question. Just first, it seems like the top-balth e-bada may have come in a bit under your expectations and 4Q despite a pretty strong St.Venys cell. What were the key drivers there? Was this weather-related impacting high-margin corporate events that's getting...
maybe pushed into January and then also the 2023 guide for top golf implies a nice increase in segment e-wadam margins what would be the key drivers there is that some of the dynamic pricing, the labor productivity initiatives, the project pie, what sort of driving.
the increase in the segment EBITDA margins for top calls in 23. Thanks. Hey, this is Brian . I'll answer the first question and let Chip jump in on the second one.
For the Q4, the flow through for Topgolf is not what we would normally expect.
in a normal quarter. But in this one we had a lot of incremental pre-opening expenses. They opened six new venues in Q4 of 2022 compared to only one in the prior year.
And then on top of that, this last year we also launched the National Marketing Campaign. Down there, you'd have a lot of incremental marketing expense related to that.
And then there was just some catch up of overhead investment that we had done throughout the year that they caught up like you for.
And then, you know, Alex, this is Chip, you know, relative to the guide, the miss at Top Golf was strictly weather. I mean, it was, they had a very extreme or majority weather.
70, 80% of it. And in December , if you remember back, there was literally life-threatening cold weather in roughly the third week of December in broad swaths of the country. We had to shut down.
30 venues and then another 18 were impacted. And so that affected the revenue and the flow through relative to the mist relative to our God.
And then when you look at the strong EBITDA margin improvement and at top golf, you're seeing that happen consistently, by the way. That's been continuing to leverage in scale. You are seeing it being driven by the same venue sales growth, by the initiatives we're putting in place with PIE.
and the ability to open the venue so successfully. We're optimistic on the marketing program contributing to that. And as mentioned, these venues are in.
increasing their overall operating margin as well. So a really virtuous cycle of good results from the venue business at Topgolf.
Our next question today will come from Daniel Imbrow of Stevens Inc. Please go ahead.
Yeah, hey, good evening everybody. Chip, I want to follow up actually on that last answer. You gave the question on top golf. Can you be a little more specific? You know, curious when...
The timing wise you plan on implementing some of that dynamic pricing when pie starts to go into effect on a window timing And then just are there any other labor or productivity opportunities you guys have found now that you've had top glove under your belt for a year?
Sure, Daniel. So, Ty has been an issue that the team has been working on now for a year and a half, but it was only in 18 venues at the end of 2022. And as mentioned, we're going to have it in all of the venues by the end of 2023. So...
That will, you know, unlock increased reservation capability, increased pay management capability and improve operating margins. We think it's in a great opportunity and we also think, in fact, we know...
that the consumer likes the ability to make these reservations and to know that they have a specific time to enjoy beta. So that is a very significant driver of the improved results and we expect. But we've been driving.
improved operating margins. As we previously mentioned, the operating margins were historically EBITDA at a venue. 39% when we acquired the business. We told you at the investor day we thought we could exceed 32%.
We have exceed that and we're telling you we can now continue to drive further improvement. That's, that's helpful thingss. And then want just touch the overall kind of company guidance. You know I think you raised it roughly. Call it three million at the midpoint. Obviously you back F X has gotten better. I think the footnotes points about 35 million of better efx.
from a few months ago. So just kind of curious what the puts and takes are on the core business as to why maybe you know we've had a solid pre-order sale paradigm, Topgolf obviously you know doing well. So what are the puts and takes in the core guidance FX that have changed from a few months ago?
Hey, this is Ryan D. The increase from the 600 million we previously got it to now, to now really reflects all FX adjustments. If you bake in the FX rates, change the FX rates, you bake in our hedging program everything, that's the all-in number.
I think Brian , isn't the FX-45 million better than a few quarters ago? So I was wondering what the core looked like, maybe drop of 10 to 15, kind of what was accounting for that. Well, when we, you know, when we said approximately 600, it was a little bit under 600 last time when we...
snapped the chalk line but we were giving pre guidance. And so, you know, we're within rounding of all of it being F-AX and all of it going into to the number. Daniel. Got it. That's helpful color. Appreciate it. That's a look.
pre-guidance. And so, you know, we're within rounding of all of it being F-AX and all of it going into the number. Daniel. Got it. That's helpful, color. Appreciate it. That's a look. Yep, thank you.
Our next question will come from Joe Altobello of Raymond James. Please go ahead.
Thanks, guys. Good afternoon. First question on golf equipment. You mentioned you expect segment sales to be flat this year. I guess first, how much benefit did you have last year from from from from channel fill trying to figure out how much you have to anniversary? Maybe secondly.
How do you see the overall goth equipment industry spend in 23? Is it sort of flattish with last year as well?
Yeah, Joe, good questions. We estimate that Channel Phil provided a one-term benefit last year of about $80 to $100 million, and we won't be interversing that this year. And then overall golf equipment, we're expecting the market to be...
you know, approximately flat there, maybe down a couple points. We generally hold ourselves in our standards to be a little bit better than the market we expect and to do that again this year, but we think the market will have a solid year.
Although, you know, we're not at this point forecasting significant growth for the industry at large.
That's helpful. Maybe on top golf you mentioned a new format you're seeing you're using and in Boise in which it's how should we think about those additional 50 venues? Is that at the end of the plan or is that maybe 15 a year rather than 11?
No, we're still holding to our 11 per year, but we just believe we'll have more years of growth out there at this point.
scatter into the plan. We're not going to break down when we'll see large mediums or this new version into the mix, but no real change in the number of venues, but a larger tam and expect more opportunity for growth out of the business.
Our next question today will come from Michael Swartz of Truist Securities. Please go ahead.
Hey guys, good afternoon. I just want to touch on top trace of range. I think you had about 7,000 day installs in 22 and I think you're calling for another 7,000 plus in 23. But I think at the time you acquired the business you would expect something like 8,000 additions a year is kind of the run rate. Maybe with the sense of
you know, why that's been pulled back a little bit. Is that just still just supply chain challenges or is there something more structural to why you're not planning to grow that fast going forward?
Sure, Michael, good question. So you're correct. We did just over 7,000 in 2022. We expect to grow that from that 7,000. So that puts us within rounding of that 8,000 for this year. Not a material change on our forecast for 2023.
And we've had great success, in fact exceeded our expectations on covered range bay conversions where sales have been outstanding. The ramp on the green grass market has been a little slower than what we initially expected. We're making investments there.
It's sort of what we're finding a little bit like golf equipment. Greengrass is a channel that just takes a little longer to get into, but it's a really valuable channel and we certainly have the infrastructure to do that. We think the PGA of America partnership and endorsement will help us on that.
Thank you. And it may just follow a question on top off. I think you said it's going to be another...
heavily weighted development year in the fourth quarter. Any way you can sense of presumably those won't be extremely additive to 2023 from a revenue or a profitability standpoint. But is there any way to think about the annualized benefit from eight locations that would be going in in the fourth quarter?
Expense...
and other startup costs, if you would, or a little pre-opening should cover most of that. But so it's not particularly additive on the bottom line for the year, but we obviously have the six that opened last.
Q4 that will be additive for the year, but the eight that are opening this Q4 probably don't help us this year.
That's right, and maybe Michael, what it does add the next following year, right, it's, we don't have a perfect way, but we told you what a representative venue does from a revenue and a four wall margin. You know, the ones that we've opened in 22, and we told you in 23, a little larger than a representative and.
Our next question today will come from KCL Exander of Compass Point Research and Trading.
Hi, good afternoon.
Check your guidance for the first quarter looking for order cancellations from Kansas City Country Club based upon what you guys did. I knew we took a little risk there. We love all the Midwest as well, Casey, for the record.
A lot of good questions have already been asked. I'm going to ask you a couple more. In light of your sort of flattish year-over-year golf equipment guidance,
But you've got great market share growth and now covered 300 million in golf ball. And golf ball is such a volume driven business as the volume goes up, the margins expand dramatically.
How do you push that business further and get it, you know?
You took a long time to go for 15 to 20. How do we now go from 20 to 25? And what could that do to profitability on the golf equipment side?
Yeah, you've got great points there because we've been really proud, Casey, of how we have steadily grown that market share over, you know, six, eight years, right? So this has been a prolonged run of continual growth in market share in the golf ball. You know, we now are just over.
deliver that same level of study, you know, three yards in a cloud of dust growth. And, you know, that growth also tends to stick with you when you do it that. We're building great relationships of green grass.
We're building and have invested quite a bit into the chickpea facility to build what we think is the best golf ball and golf.
You know, the John Roms, the Zanders that are using it on tour. We're obviously working and investing in new capabilities. So.
You know, we're very committed to the business, excited on the results, and we think that the formula that we've used over the last several years will continue to service well going forward. And my follow-up is I'm curious about your comment about top tracer. We'reeme Right Chapter-S?er.
Obviously, at the PGA show, you made a very great effort to connect top tracer with the PGA professional. But is the difficulty at Greengrass the fact that he's often not the decision maker, right? I mean, the decision maker on capital expenditure things like that is often a committee. And, you know, committees can be a lot harder to convince than a...
we're connecting with the PGA professional. There's an energy around that business. It makes sense. It is going to be the future of driving ranges, both covered and uncovered. And although the director of golf or the PGA professional may not be the only decision maker.
As momentum builds around range conversions and our product and relationships get stronger, it's certainly nice to have a strong advocate there.
Our next question will come from Eric Lode of Be Riding Securities. Please go ahead.
Thank you. Two questions I guess. One, falling off on the rollout of the reservation and variable pricing system, you know, throughout the network by the end of the year. I actually think about the cadence of that rollout during the year and those venues coming online, maybe kind of what would benefit you baked into diet in terms of.
You know, when that happens and how much benefit this year versus maybe more of it next year, depending on that timing. I think it, you know, to the best of my knowledge, Eric, it, it scales throughout the year. So, you know, we only had it in 18 venues. We'll.
It'll go in almost on an equal by quarter basis throughout the year. Got it.
it'll go in almost on an equal by quarter basis throughout the year. Got it. And then the second question.
You saw an email promotion today, one of the recent ones offering a bonus at Travis Matthew for spending at Topgolf. Maybe talk a little bit about where you're focused this year and boosting awareness between the various customer groups of the different brands and driving initial rubber synergies.
between the segments. Is there a different focus this year or kind of where you put your attention? Yeah, Eric, thanks for noticing that and I'd highly recommend that you might wanna take that up for the loved ones in your life. That's a promotion where if you buy a, I think it's a $50 gift card.
for Baytime at Talk Off and what Valentine wouldn't love that. You get a $25 gift card for Travis Matthew, his or hers.
So, but it's a great example of cross-brand promotion that we have such a wonderful opportunity of. You know, both we're building out the digital assets for that. The marketing teams are coming together. Early days you would see, you know, some logo exposure putting Topgolf on.
John Ram, Sleeve, our tour bags, you'll see more and more opportunities where we're able to cross-promote different loyalty programs. We had our launch event at a top golf for paradigm drivers.
It's a just a exciting opportunity to use the power of these brands together and we're going to continue to lean in on that.
Our next question today will come from George Kelly of ROP-MKM. Please go ahead.
So first one is just that you ended the quarter with close to a billion of inventory, and I'm just curious what is the normalized level and when do you think you can get there? George, you're right. Immatorial is currently year over year at the end of the year. Almost all that is great percentage that is current year product. It just arrived earlier than expected with the supply chain channel challenges earlier with the pandemic. People started pushing product ordering product earlier to make sure we get it, and then all set in the supply chain caught up and shifted earlier. But it's all it's all current that you will see.
start to normalize in the back half of the year. Our days on inventory on hand are just slightly higher than pre-pandemic levels and we feel good about it. It just has to work its way through as we launch products. Okay, understood. And then second question.
I'm just trying to understand the reservation sort of roll out a bit better. So a few topics I was hoping you could maybe cover a little more in detail. But the 18 that you've already implemented this system and can you quantify?
What you've seen at all, I'm assuming it's mainly a pricing impact so far, but any kind of quantification would be helpful. And then secondarily... wasting of 0 points and average content only reduce actual status.
When you put the system in place, is there a lot of kind of education that you have to do to consumers or do folks know about it? And is there still a lot of like several years of kind of penetration as you educate your customer base about it? And so it's not just that it needs to roll out everywhere, it really needs to...
There needs to be an education process as well that will take longer.
So in terms of the education, in terms of the metrics, George, we're not going to, unfortunately, give you specifics on those. But we have seen improvements in the venues where we put this in both in sales metrics. So if you would, it's more better, same venue sales.
better Bay utilization, Bay turn times, et cetera, and improved consumer satisfaction. So we see...
very tangible and attractive metrics from it. And I think your point on the education is very sound and a good one. So it requires some education of the consumer. But it also requires.
a lot of training education and from the playmakers, right? Because it's a whole different way of doing business. It's reserving a bay time or getting a different methodology where you're...
You know we have to have the consumer understand that they have the bay for a specific period of time You know they don't stay indefinitely, but you reserve and to have a two-hour block if you would
We'll have to have the consumers be aware that they can make these reservations. They want to do so because the biggest complaint that we had at Topgoff, and I know this sounds silly, but it was that the weights were too long.
You know, for a person like myself, I don't want to wait four hours to go anywhere, quite frankly.
If there's an opportunity to reserve that time, even if they charge me a little bit more for it, I'm all in. And I think many are. But we're going to have to teach the team how much to release in terms of the reservation system anyway.
I got to tell you that the top golf team is embracing it. They fully understand the attractiveness of this, and both the management and the playmakers are just doing a wonderful job. We couldn't be more proud of them. They're making a big difference. They're continuing to delight the consumer, and now they're transitioning and some of their...
for any closing remarks. Well, I want to just thank everybody for their time. Obviously Brian and I are diehard Eagles fans, so you know we're we're rooting on one side of the equation this Sunday, but we hope everybody has a great Super Bowl weekend.
and we look forward to updating you on the start of our year on our next call. Thank you so much for attending this one.
And the conferences now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.