Q4 2023 Topgolf Callaway Brands Corp Earnings Call
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I would now like to turn the conference over to Katina meta Dockers, Vice President of Investor Relations and corporate Communications. Please go ahead.
Thank you operator, and good afternoon, everyone welcome to cap golf Callaway brands fourth quarter and full year 2023 earnings conference call I'm Kachina missed the docket, the company's vice President of Investor Relations and corporate Communications joining me as speakers on today's call are chip Brewer, our president and Chief Executive Officer, and Brian Lynch, Our chief.
Financial Officer, and Chief legal Officer.
Earlier today, the company issued a press release announcing its fourth quarter and full year 2023 financial results. We've also published an updated presentation with supplemental information that we suggest you follow during todays call if necessary, we will extend todays call to give ample time for a question and answer session. Our earnings presentation as well as the earnings.
Press release are both available on the company's Investor Relations website under the financial results tab most of the financial numbers reported and discussed on today's call are based on U S. Generally accepted accounting principles.
In the instances, where we report non-GAAP measures, we identify the non-GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with regulation G.
Please note that this call will include forward looking statements and 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 and the press release for a more complete description and with that I'd now like to turn the call over to chip Brewer. Thank you Katrina.
Good afternoon, and thank you for joining our call today everybody.
Starting on slide three we entered 2023 on a positive note.
Our Q4 expectations for both revenue and EBITDA.
This was driven by continued strength in both our golf equipment business and the Travis Matthew.
As well as better than expected performance at top golf, where same venue sales outperformed on strong holiday results and where we continue to drive improvements in venue level profitability.
Looking across our businesses for the full year golf equipment delivered excellent brand performance, maintaining its leadership positions in golf club market shares.
And in the overall technology and innovation ranking.
Our active lifestyle segment delivered solid growth in revenue and profitability driven by continued momentum at Travis Matthew in.
And at top golf the team delivered 1% same venue sales growth for the full year on top of 7% growth in 2022.
As well as an impressive 100 basis points of venue level adjusted EBITDA margin expansion.
They also added 12, new venues with 11, new builds and one purchased via the big shots acquisition.
2023 also marked an important financial inflection point for our company.
That being our transition to positive free cash flow.
Our results showed a $160 million of free cash flow at the consolidated level and $49 million at the top golf level.
As you know given the variable timing of reimbursements, we believe the most appropriate cash flow metric is embedded cash flow, which is free cash flow, excluding new venue and store growth capex.
Using this metric, we delivered $221 million and $94 million at the total company and top golf levels.
These numbers reflect positive trends in our fundamentals.
And you had strength in both our golf equipment business.
Looking forward, we expect our cash flow will stay meaningfully positive from here and that are embedded cash flow will increase slightly this year.
And Travis Matthew.
As well as better than expected performance at top golf, where same venue sales outperformed on strong holiday results and where we continue to drive improvements in venue level profitability.
We anticipate our EBITDA cash flow and EPS growth will all ramped significantly in 2025 through 2028.
Looking across our businesses for the full year golf equipment delivered excellent brand performance, maintaining its leadership positions in golf club market shares and.
Due to the leveling off of corporate investments.
Tipping point of economies of scale across our businesses and lower overall corporate interest expense as our positive cash flow allows us to pay down debt over time.
And in the overall technology and innovation ranking.
Our active lifestyle segment delivered solid growth in revenue and profitability driven by continued momentum at Travis Matthew and.
In support of this we are providing illustrative 2026 through 2028 numbers in our earnings deck.
And a top golf the team delivered 1% same venue sales growth for the full year on top of 7% growth in 2022.
These are exhibits 21 and 23.
As I'm sure you can tell I remain convinced and excited about the long term earnings power of this business.
As well as an impressive 100 basis points of venue level adjusted EBITDA margin expansion.
We have demonstrated the strength of our golf equipment business over a long period of time. The Callaway brand is strong and we are set up for an excellent 2024 with an outstanding new product range.
They also added 12, new venues with 11, new builds and one purchased via the big shots acquisition.
2023 also marked an important financial inflection point for our company.
Our active lifestyle segment has grown rapidly in both revenue and profits.
That being our transition to positive free cash flow.
And although the top golf business has experienced some post COVID-19 same venue sales volatility when.
Our results showed a $160 million of free cash flow at the consolidated level and $49 million at the top golf level.
When you look past that.
You see a business that is clearly strengthening and proving itself is a unique and appreciating asset with strong returns.
As you know given the variable timing of reimbursements, we believe the most appropriate cash flow metric is embedded cash flow, which is free cash flow, excluding new venue and store growth capex.
Top golfs track record for selecting an opening venues is extraordinary.
All do well and average opening results have exceeded our targets.
This is a skill set that has been built up over years and relies on multiple teams and functions across our organization.
Using this metric, we delivered $221 million and $94 million at the total company and top golf levels.
It makes us unique.
Others have tried but as of yet no one has been able to replicate our model.
These numbers reflect positive trends in our fundamentals.
Looking forward, we expect our cash flow will stay meaningfully positive from here and that are embedded cash flow will increase slightly this year.
And it supports our strong confidence in our capital allocation strategy.
In addition, our venues are increasingly profitable over time with what we believe is a clear path to further upside.
We anticipate our EBITDA cash flow and EPS growth will all ramped significantly in 2025 through 2028.
I'll, even add we have now shown we can do this in the face of same venue sales volatility.
Due to the leveling off of corporate investments.
In short the.
The venues are achieving the return targets we communicated.
Tipping point of economies of scale across our businesses and lower overall corporate interest expense as our positive cash flow allows us to pay down debt over time.
And our long durable and appreciating assets.
To help demonstrate these points. We have included updated cohort in a historical historical data in our earnings presentation. These are slides 16 through 18.
In support of this we are providing illustrative 2026 through 2028 numbers in our earnings deck.
They show increasing average venue sales over time and increasing EBITDAR.
These are exhibits 21 and 23.
As I'm sure you can tell I remain convinced and excited about the long term earnings power of this business we.
There is volatility over short periods of time, but over the longer periods the trends are clear.
We have demonstrated the strength of our golf equipment business over a long period of time. The Callaway brand is strong and we are set up for an excellent 2024 with an outstanding new product range.
As for the durability of the assets. The UK venues are now approaching 20 years old and.
And still continue to grow both sales and profitability.
Before speaking about where we're going this year I'd like to put our longer term opportunity into context by highlighting the underlying strength of the sport of golf and how the modern golf ecosystem is evolving.
Our active lifestyle segment has grown rapidly in both revenue and profits.
And although the top golf business has experienced some post COVID-19 same venue sales volatility when.
When you look past that.
As shown on slide four per the National Golf Foundation. There are now a total of $45 million on and off course golfers up.
You see a business that is clearly strengthening and proving itself is a unique and appreciating asset with strong returns.
Up 9% year over year and up 32% since 2019.
Top golfs track record for selecting an opening venues is extraordinary.
Within this.
All do well and average opening results have exceeded our targets.
An estimated $26 6 million Americans played golf on course in 2023.
This is a skill set that has been built up over years and relies on multiple teams and functions across our organization.
Up $1 million year over year, and what was the largest one year growth in participants since 2001.
It makes us unique.
Others have tried but as of yet no one has been able to replicate our model.
Driven by an all time high first time on course golfers of $3 4 million.
And it supports our strong confidence in our capital allocation strategy.
I believe it is both impressive and instructive that this far past Covid on course golf is still seeing this kind of momentum.
In addition, our venues are increasingly profitable over time with what we believe is a clear path to further upside.
At the same time, $32 9 million Americans participated and off course golf.
I'll, even add we have now shown we can do this in the face of same venue sales volatility.
Up 18% year over year and up 41% since 2019.
In short the.
The venues are achieving the return targets we communicated.
The game of golf at large is clearly benefiting from a large influx of participants.
And our long durable and appreciating assets.
To help demonstrate these points. We have included updated cohort in a historical historical data in our earnings presentation. These are slides 16 through 18.
Capital the benefit of more flexible work environments.
Positive change in perception of the game, especially with teens and young adults.
And the structural growth of off course golf.
They show increasing average venue sales over time and increasing EBITDAR.
Within this context top golf alone is adding three to 4 million new unique visitors each year.
There is volatility over short periods of time, but over the longer periods the trends are clear.
And we will have over 30 million unique visitors in 2024.
As for the durability of the assets. The UK venues are now approaching 20 years old and still continue to grow both sales and profitability.
Thus, making it a major force in overall golf with a larger individual participation than total on course golf.
Speaker Change: Before speaking about where we're going this year I'd like to put our longer term opportunity into context by highlighting the underlying strength of the sport of golf and how the modern golf ecosystem is evolving.
In response to those that May question, if off course golf will drive encores we.
We now know that around two thirds of today's on course beginners are coming to the course with off course experience.
Speaker Change: As shown on slide four per the National Golf Foundation. There are now a total of $45 million on and off course golfers.
Compared to less than 40% five years ago.
And already 10% of today's total on course players credit top golf for getting them to the golf course.
Speaker Change: Up 9% year over year and up 32% since 2019.
Speaker Change: Within this an estimated $26 6 million Americans played golf on course in 2023.
Now turning to our 2020 for guidance.
Proud to report that were once again projecting growth in revenue EBITDA and embedded cash flow.
Speaker Change: $1 million year over year, and what was the largest one year growth in participants since 2001.
We have also planned our business somewhat conservatively given the uncertain consumer environment and.
Driven by an all time high of first time on course golfers of $3 4 million.
And we're continuing to invest in key corporate infrastructure and profitability initiatives.
Speaker Change: I believe it is both impressive and instructive that this far past Covid on course golf is still seeing this kind of momentum.
Both at the corporate level and at top golf.
Like our venues we feel very good about the long term returns on these investments.
Speaker Change: At the same time, $32 9 million Americans participated and off course golf.
And we believe we will show leverage on them relatively quickly.
Most likely by 2025.
Speaker Change: Up 18% year over year and up 41% since 2019.
Lastly, <unk>.
Specific projects, some of which I'll share with you today and with more to come throughout the year. We are also now entering the stage, where we will be unlocking more of the exciting revenue brand and digital synergies that our structure uniquely allow.
Speaker Change: The game of golf at large is clearly benefiting from a large influx of participants.
Speaker Change: Capital the benefit of more flexible work environments.
Speaker Change: Positive change in perception of the game, especially with teens and young adults.
Now I'd like to walk you through our business segment performance.
Speaker Change: And the structural growth of off course golf.
Speaker Change: Within this context top golf alone is adding three to 4 million new unique visitors each year.
At our top golf venue business.
During the quarter and for the full year, we made progress on our three key performance drivers.
Speaker Change: And we will have over 30 million unique visitors in 2024.
Starting with venue unit growth we.
Speaker Change: Thus, making it a major force in overall golf with a larger individual participation than total on course golf.
We successfully and strongly opened eight venues in Q4 for a total of 11 new venues in 2023.
Our new venues continue to perform extremely well, we all sat added one venue via acquisition in 2023.
Speaker Change: In response to those that May question, if off course golf will drive on course.
Speaker Change: Now know that around two thirds of today's on course beginners are coming to the course with off course experience.
And in early January of this year, we purchased one additional venue from big shots in Bryan, Texas adjacent to Texas, A&M University for approximately $7 million.
Speaker Change: Compared to less than 40% five years ago.
Speaker Change: And already 10% of today's total on course players credit top golf for getting them to the golf course.
As of this call.
We now own and operate 94 venues and our five top golf franchise locations and three big shot franchisee locations.
Speaker Change: Now turning to our 2020 for guidance on <unk>.
Speaker Change: Rod to report there were once again projecting growth in revenue EBITDA and embedded cash flow.
We expect to add another seven new top golf venues. This year two in the first half and five in the second half.
Speaker Change: We have also planned our business somewhat conservatively given the uncertain consumer environment.
For a total of eight new venues in 2024.
Speaker Change: And we are continuing to invest in key corporate infrastructure and profitability initiatives.
We also expect to help opened two international franchisee locations.
Both at the corporate level and at top golf.
For 2025, we are expecting to return to opening 10 to 11 new owned venues.
Like our venues we feel very good about the long term returns on these investments.
Moving onto same venue sales performance in Q4, our same venue sales declined 3%, which was meaningfully ahead of our expectations driven by stronger than expected results in our one or two bay consumer oriented business, particularly.
Speaker Change: And we believe we will show leverage on them relatively quickly.
Speaker Change: Most likely by 2025.
Speaker Change: Lastly via specific projects, some of which I will share with you today and with more to come throughout the year. We are also now entering the stage, where we will be unlocking more of the exciting revenue brand and digital synergies that our structure uniquely allow.
Particularly at the end of December.
For the quarter are one to two basis same venue sales was flat just as it was in Q3.
Our three plus Bay, primarily corporate business continued to stabilize during the quarter and had its second consecutive quarter of relative improvement.
Speaker Change: Now I'd like to walk you through our business segment performance.
As a reminder, corporate is usually approximately 30% of sales in Q4 and 20% for the full year.
At our top golf venue business.
Speaker Change: During the quarter and for the full year, we made progress on our three key performance drivers.
Our December results were undoubtedly helped by weather as we had challenging weather in December 2022, but seasonally very mild weather in December 2023.
Speaker Change: Starting with venue unit growth.
Speaker Change: We successfully and strongly opened eight venues in Q4 for a total of 11 new venues in 2023.
Having discussed the quarter I'm pleased to report the full year same venue sales ended in positive territory up 1%.
Speaker Change: New venues continue to perform extremely well, we all sat added one venue via acquisition in 2023.
Speaker Change: And in early January of this year, we purchased one additional venue from big shots in Bryan, Texas adjacent to Texas, A&M University for approximately $7 million.
This is a notable achievement, particularly when you consider the strength of our 2022 same venue sales growth.
And the strong two year stacks as shown in exhibit nine.
Our <unk> business, which is primarily consumer and comprises 80% of our annual venue revenues was up 4% for the full year.
Speaker Change: As of this call.
Speaker Change: We now own and operate 94 venues and have five top golf franchise locations and three big shot franchisee locations.
And when you consider our comp sales versus pre COVID-19 levels are.
Speaker Change: We expect to add another seven new top golf venues. This year two in the first half and 5% in the second half for a total of eight new venues in 2024.
Our one in two bay consumer business is up 11% versus 2019.
While the three plus Bay corporate business is up 1%.
Looking ahead, our 2024 guidance recognizes a tough comp in Q1.
We also expect to help open to international franchisee locations.
Some poor weather to start the year in January.
Speaker Change: For 2025, we are expecting to return to opening 10 to 11 new owned venues.
With this we are expecting Q1 same menu sales to be down potentially high single digits.
Speaker Change: Moving onto same venue sales performance in Q4, our same venue sales declined 3%.
After Q1, we see somewhat easier comps and are forecasting approximately flat same venue sales for the full year.
Speaker Change: Which was meaningfully ahead of our expectations driven by stronger than expected results in our one to two bay consumer oriented business.
As we've previously discussed our two points of weakness on the same venue sales during the second half of 2023.
Speaker Change: Particularly at the end of December.
Speaker Change: For the quarter are one to two base same venue sales was flat just as it was in Q3.
Our midweek traffic and events.
To help address the midweek opportunity we're in process of implementing weekday promotions.
Speaker Change: Our three plus Bay, primarily corporate business continued to stabilize during the quarter and had its second consecutive quarter of relative improvement.
Primarily half off game play Monday through Wednesday via the App.
Our test markets indicate this new mid week promotion will help keep us competitive with other entertainment and leisure options.
Speaker Change: As a reminder, corporate is usually approximately 30% of sales in Q4 and 20% for the full year.
We will be net profitable.
Speaker Change: Our December results were undoubtedly helped by weather as we had challenging weather in December 2022, but seasonally very mild weather in December 2023.
And we will also help drive our digital business, which will in turn provide a long term benefit.
We do not believe they will be a major driver of sales growth.
Having discussed the quarter I am pleased to report the full year same venue sales ended in positive territory up 1%.
But they will help and appear to be an appropriate response that balances short and long term needs.
To help further stabilize events, we're improving our programs and value adds for both smaller events, such as team buildings or birthday parties as well as larger corporate bookings.
Speaker Change: This is a notable achievement, particularly when you consider the strength of our 2022 same venue sales growth.
Speaker Change: And the strong two year stacks as shown in exhibit nine.
Our <unk> business, which is primarily consumer and comprises 80% of our annual venue revenues was up 4% for the full year.
Looking further down field, we are developing additional consumer offerings not necessarily value oriented.
That we are going to be announcing in early Q2.
Speaker Change: And when you consider our comp sales versus pre COVID-19 levels are.
We're also starting to really scale, our digital offerings, something I'll speak more about in a moment.
Speaker Change: Our one in two bay consumer business is up 11% versus 2019.
We believe both of these initiatives will be appealing to consumers and could create upside.
Speaker Change: While the three plus Bay corporate business is up 1%.
Speaker Change: Looking ahead, our 2024 guidance recognizes a tough comp in Q1.
Moving onto our third and final key performance driver of venue margin expansion. This.
Speaker Change: And some poor weather to start the year in January.
This is really the biggest highlight of 2023 for top golf.
Speaker Change: With this we are expecting Q1 same menu sales to be down potentially high single digits.
Top golf has experienced increase efficiencies driven by our Pi inventory management system.
Speaker Change: After Q1, we see somewhat easier comps and are forecasting approximately flat same venue sales for the full year.
Along with our new labor model and Cogs initiatives that together are working beautifully.
As a result, our 2023 venue level adjusted EBITDA margin increased approximately 100 basis points year over year to approximately 34%.
Speaker Change: As we've previously discussed our two points of weakness on the same venue sales during the second half of 2023.
Speaker Change: We're midweek traffic and events.
Speaker Change: To help address the midweek opportunity we're in process of implementing weekday promotions.
And in Q4 alone we expanded EBITDAR by approximately 370 basis points, despite our highest margin business the events business being down during the quarter.
Speaker Change: Primarily half off game play Monday through Wednesday via the App.
Speaker Change: Our test markets indicate this new midweek promotion will help keep us competitive with other entertainment and leisure options.
Hopefully this provides confidence in our ability to continue to drive improvements in this important metric.
Speaker Change: We'll be net profitable and will also help drive our digital business, which will in turn provide a long term benefit.
2023 was an important year for laying the technology foundation in our venues with the rollout of top tracer across all U S venues.
Speaker Change: We do not believe they will be a major driver of sales growth.
Thus, allowing a common gaming platform.
Speaker Change: But they will help and appear to be an appropriate response that balances short and long term needs.
As well as the rollout of our Pi inventory management and booking system across all venues.
Speaker Change: To help further stabilize events, we're improving our programs and value adds for both smaller events, such as team buildings or birthday parties as well as larger corporate bookings.
These critical steps enable us to turn our efforts towards accelerating in venue digital capabilities.
<unk> new gaming innovation.
As well as bringing cross brand synergies to life in 2024 and beyond.
Speaker Change: Looking further down field, we are developing additional consumer offerings not necessarily value oriented that.
To this end, we've created a new commercial and digital team within top golf debt.
Dedicated to optimizing revenue management and driving our digital business.
Speaker Change: We are going to be announcing in early Q2.
We're also starting to really scale, our digital offerings, something I'll speak more about in a moment.
Examples of what the top golf digital team is working on.
Speaker Change: We believe both of these initiatives will be appealing to consumers and could create upside.
Shown on slide 13.
And I encourage you to review it. So you have the appropriate feel for the impact these initiatives will have on our business.
Speaker Change: Moving onto our third and final key performance driver of venue margin expansion.
One specific project that I'll mention is our company wide consumer data platform.
Speaker Change: This is really the biggest highlight of 2023 for top golf.
Which is now expected to be up and running by the second half of this year.
Speaker Change: Top golf has experienced increase efficiencies driven by our Pi inventory management system.
This important project will unlock digital synergies across the brands and is expected to be a significant catalyst for future growth opportunities across our brand portfolio.
Speaker Change: Long with a new labor model and Cogs and initiatives that together are working beautifully.
Speaker Change: As a result, our 2023 venue level adjusted EBITDA margin increased approximately 100 basis points year over year.
Speaking of cross brand synergies there is a lot to be excited about in the coming weeks as shown on slide 14.
Speaker Change: Approximately 34%.
Starting just last week, all top golf players will have the opportunity to upgrade the callaway branded premium clubs at all venues.
Speaker Change: And in Q4 alone we expanded EBITDAR by approximately 370 basis points.
Speaker Change: Despite our highest margin business the events business being down during the quarter.
By mid year. This will include clubs specifically designed by Callaway for use in Bay.
Speaker Change: Hopefully this provides confidence in our ability to continue to drive improvements in this important metric.
By both established golfers.
And those new to the game.
In the near future, we will be able to up sell this program via the App and in reservations.
Speaker Change: 2023 was an important year for laying the technology foundation in our venues with the rollout of top tracer across all U S venues.
All top golf golf professionals are on Callaway golf staff.
And can now exclusively sell Callaway golf equipment to their students.
Speaker Change: Thus, allowing a common gaming platform.
Speaker Change: As well as the rollout of our Pi inventory management and booking system across all venues.
Callaway will be hosting organized club fitting events at all venues beginning with the first major of 2024.
Speaker Change: These critical steps enable us to turn our efforts towards accelerating in venue digital capabilities create.
And we will also be the official equipment sponsor of top Golfs League nights.
Speaker Change: Creating new gaming innovation.
In addition, our respective marketing teams are leaning into our Callaway Chrome tour golf ball launch to promote sales and trial of our new golf ball.
Speaker Change: As well as bringing cross brand synergies to life in 2024 and beyond.
Speaker Change: To this end, we've created a new commercial and digital team within top golf.
Our goal is 200000, new users coming specifically from top golf.
Speaker Change: Dedicated optimizing revenue management and driving our digital business.
We also plan to show various Callaway branded limited edition golf balls in venues throughout the year.
Speaker Change: Examples of what the top golf digital team is working on are shown on slide 13.
We have an exciting callaway in top golf Golf club program that will run across all venues.
Speaker Change: And I encourage you to review it. So you have the appropriate feel for the impact these initiatives will have on our business.
And Travis Matthew will increase its presence in approximately one third of the venues where the price point works effectively.
Speaker Change: One specific project that I'll mention is our company wide consumer data platform.
And later in the year, we'll be implementing a new callaway digital kiosk in the lobby of all venues.
Speaker Change: Which is now expected to be up and running by the second half of this year.
Speaker Change: This important project will unlock digital synergies across the brands and is expected to be a significant catalyst for future growth opportunities across our brand portfolio.
That we hope will amaze and delight, all the new and existing golfers that visit the venues during the year.
Also towards the end of this year or early next we will be introducing specific callaway branded golf equipment designed for the beginner golfers.
Speaking of cross brand synergies there is a lot to be excited about in the coming weeks as shown on slide 14.
<unk> introduced to the sport via top golf.
We will then leverage the consumer data platform and our digital teams to market. This product to these new players, thus, creating a competitive advantage and reach to what should be the largest single source of new golfers in the modern golf ecosystem.
Speaker Change: Starting just last week, all top golf players will have the opportunity to upgrade the callaway branded premium clubs at all venues.
Speaker Change: By mid year. This will include clubs specifically designed by Callaway for use in Bay.
Speaker Change: By both established golfers.
We expect over 30 million unique players will walk into top golf venues in 2024.
Speaker Change: And those new to the game.
Speaker Change: In the near future, we will be able to up sell this program via the App and in reservations.
With a strong in venue Callaway brand presence the ability to trial Callaway premium equipment in our base.
Speaker Change: All top golf golf professionals are on Callaway golf staff.
And an advantage in digital reach as well, we're excited about brand Callaway being front and center with this next generation of modern golfers.
Speaker Change: And can now exclusively sell Callaway golf equipment to their students.
Speaker Change: Callaway will be hosting organized club fitting events at all venues beginning with the first major of 2024.
At the same time, Callaway and Travis Matthew will be working to drive awareness and business the top golf.
Speaker Change: And we will also be the official equipment sponsor of top Golfs League nights.
All of this is in addition to the synergies we've already been enjoying such as a lower cost of capital and faster venue expansion at top golf.
Speaker Change: In addition, our respective marketing teams are leaning into our Callaway Chrome tour golf ball launch to promote sales and trial of our new golf ball.
Shared corporate services top tracer sales synergies.
Speaker Change: Our goal is 200000, new users coming specifically from top golf.
Tore exposure as well as other key partnerships across the brands and operational support including distribution and sourcing.
Speaker Change: We also plan to show various Callaway branded limited edition golf balls in venues throughout the year.
Our 2024 forecast for top golf is specifically called out in our guidance section so I won't speak to it directly here I'll.
Speaker Change: We have an exciting callaway in top golf Golf club program that will run across all venues.
I'll add that we expect top golf to be free cash flow positive on its own right.
Speaker Change: And Travis Matthew will increase its presence and an approximately one third of the venues where the price point works effectively.
And we're delighted with the direction of the business.
Moving to golf equipment the.
Speaker Change: And later in the year, we'll be implementing a new callaway digital kiosk in the lobby of all venues.
The business performed exceptionally well from a brand perspective in 2023.
Our U S dollar market share placed us as the no more club brand and the number two golf ball brand.
Speaker Change: A piece that we hope will amaze and delight, all the new and existing golfers visit the venues during the year.
In clubs alone we were the number one in total clubs drivers.
Speaker Change: Also towards the end of this year or early next we will be introducing specific callaway branded golf equipment designed for the beginner golfers.
Woods hybrids and irons.
This was led by our 2023 launch of paradigm.
Speaker Change: <unk> introduced to the sport via top golf.
In Q4, we had a highly successful launch of our new AI one putter line.
Speaker Change: We will then leverage the consumer data platform and our digital teams to market. This product to these new players, thus, creating a competitive advantage and reach to what should be the largest single source of new golfers in the modern golf ecosystem.
Global revenues were up 5% in Q4, and approximately flat on a full year currency neutral basis.
Despite an approximately $100 million headwind related to 2020 twos retail inventory catch up.
Speaker Change: We expect over 30 million unique players will walk into top golf venues in 2024.
Golf demand remained robust through 2023 rounds played grew 4% year over year and 2023 marks the fourth year in a row, where rounds played have exceeded $500 million.
With a strong in venue Callaway brand presence the ability to trial Callaway premium equipment in our base.
Speaker Change: And an advantage in digital reach as well, we're excited about brand Callaway being front and center with this next generation of modern golfers.
And I have already discussed with you the strength in participation, including new entrants.
Speaker Change: At the same time, Callaway and Travis Matthew will be working to drive awareness and business the top golf.
In early January we announced some very exciting new launches in both clubs and golf ball.
Speaker Change: All of this is in addition to the synergies we've already been enjoying such as a lower cost of capital and faster venue expansion at top golf.
In clubs, our new family of AI smoke drivers fairway Woods and irons.
Truly embody calloway's leadership in R&D.
Speaker Change: Shared corporate services top tracers sales synergies.
These clubs feature in AI smart face.
Speaker Change: <unk> exposure as well as other key partnerships across the brands and operational support including distribution and sourcing.
Which optimizes performance using swing dynamics from thousands of golfers.
And micro deflections across the face.
Speaker Change: Our 2024 forecast for top golf is specifically called out on our guidance section so I won't speak to it directly here I'll.
Our marketing people say, it's best.
It's sweeter from every spot both longer and more forgiving.
On the ball side, we recently launched our new line of Chrome Tour Chrome tour X and chrome soft golf balls, which are.
Speaker Change: I'll add that we expect top golf to be free cash flow positive on its own right.
Speaker Change: And we're delighted with the direction of the business.
Speaker Change: Moving to golf equipment the.
<unk> the culmination of many years of R&D work as well as the extensive upgrade of our Chicopee ball manufacturing facility.
Speaker Change: The business performed exceptionally well from a brand perspective in 2023.
Speaker Change: Our U S dollar market share placed us as the number one club brand and the number two golf ball brand.
We are effectively launching a new brand in chrome tour.
A brand that will complement our existing strength and chrome soft and super soft.
Speaker Change: In clubs alone we were the number one in total clubs drivers.
Speaker Change: Woods hybrids and irons.
This is a big launch for us and something we don't take lightly.
Speaker Change: This was led by our 2023 launch of paradigm.
We deferred doing it previously instead waiting until we further proved out our design thesis and manufacturing capabilities.
Speaker Change: In Q4, we had a highly successful launch of our new AI one putter line.
Speaker Change: Global revenues were up 5% in Q4, and approximately flat on a full year currency neutral basis.
We are proud of our record in golf ball and both our sales and market share record over the last eight years supports this.
Speaker Change: Despite an approximately $100 million headwind related to 2020 twos retail inventory catch up.
Still we believe we have more potential we believe we make the best performing and most consistent ball in golf.
Golf demand remained robust through 2023 rounds played grew 4% year over year and 2023 marks the fourth year in a row, where rounds played have exceeded $500 million.
And we now feel ready to tell the world about it.
Yes.
As we forecast the golf equipment segment for 2024, we're encouraged that field inventories are returned to more normalized and healthy levels with no abnormal items to lap this year.
Speaker Change: And I have already discussed with you the strength in participation, including new entrants.
And consumer interest in the game remains high.
Speaker Change: In early January we announced some very exciting new launches in both clubs and golf ball.
And we're excited about the potential opportunity for our business to outperform the market given the strength of our new launches.
Speaker Change: In clubs, our new family of AI smoke drivers fairway Woods and irons.
As a result, we expect both revenues and profits to be up in this segment.
Speaker Change: Truly embody calloway's leadership in R&D.
Speaker Change: These clubs feature in AI, smart face, which optimizes performance using swing dynamics from thousands of golfers.
Switching gears to our third and final segment, our active lifestyle Division grew 9% in 2023 and continue to expand margins.
Speaker Change: And micro deflections across the face.
Topline growth was driven by continued brand momentum at Travis Matthew.
Speaker Change: Our marketing people say, it's best.
It's sweeter from every spot both longer and more forgiving.
Which had a strong year from both a top and bottom line perspective.
Speaker Change: On the ball side, we recently launched our new line of Chrome Tour Chrome tour X and chrome soft golf balls.
In 2023, Travis Matthew grew in all channels, including adding six new stores and launching into the women's category.
Speaker Change: Which reflect the culmination of many years of R&D work as well as the extensive upgrade of our Chicopee ball manufacturing facility.
In 2024, they plan to open eight to 10 new stores.
Slowly expand our international footprint as well as amplify that fantastic womens product with marketing and stronger in store exposure.
Speaker Change: We are effectively launching a new brand in chrome tour.
Speaker Change: A brand that will complement our existing strength and chrome soft and super soft.
The women's product is resonating nicely.
And although it is still small from a percentage.
Speaker Change: This is a big launch for us and something we don't take lightly.
Basis, we're optimistic on its long term potential.
Speaker Change: We deferred doing it previously instead waiting until we have further proved out our design thesis and manufacturing capabilities.
Also at Travis Matthew in 2023, we had an approximately $35 million inventory fill in and in our corporate channel that will not repeat in 2024.
Speaker Change: We are proud of our record in golf ball and both our sales and market share record over the last eight years supports this.
This will cause some year over year comparison issues for 2024 versus 2023.
Speaker Change: Still we believe we have more potential we believe we make the best performing and most consistent ball in golf and.
Excluding this we continue to expect strong revenue growth at Travis Matthew both this year and going forward.
And we now feel ready to tell the world about it.
Jack will skin margins were challenged in Q4 due to continued softness in Europe, driven by continued high field inventories and despite strong performance in China, both in Q4 and for the full year.
Speaker Change: As we forecast the golf equipment segment for 2024, we're encouraged that field inventories are returned to more normalized and healthy levels with no abnormal items to lap this year.
Speaker Change: And consumer interest in the game remains high.
That said the Jack <unk> business grew slightly on the top line.
Speaker Change: And we're excited about the potential opportunity for our business to outperform the market given the strength of our new launches.
And was approximately breakeven EBITDA in 2023 overall.
We now have new leadership in place in Europe, and we're optimistic for stabilization followed by growth during the balance of 2024 and into 2025.
Speaker Change: As a result, we expect both revenues and profits to be up in this segment.
Speaker Change: Switching gears to our third and final segment, our active lifestyle Division grew 9% in 2023 and continue to expand margins.
Overall for 2024, we're expecting approximately flat revenues with operating income slightly down in this segment.
Speaker Change: Topline growth was driven by continued brand momentum at Travis Matthew.
In conclusion two.
2023 ended on a strong note and.
Speaker Change: Which had a strong year from both a top and bottom line perspective.
In 2024 has begun with exciting new products and programs across our brands.
Speaker Change: In 2023, Travis Matthew grew in all channels, including adding six new stores and launching into the women's category.
We remain confident in our strategic initiatives and our ability to grow our cash flows from a year.
Speaker Change: In 2024, they plan to open eight to 10 new stores.
The growth is forecast to be modest for 2024 as we both continue to invest in the business.
Speaker Change: Slowly expand our international footprint as well as amplify that fantastic women's product with marketing and stronger in store exposure.
And we are also planning cautiously.
Cash flow EBITDA, and EPS, then ramp nicely as our cash flow compounds and as we leverage our scale.
Speaker Change: The women's product is resonating nicely.
Speaker Change: Although it is still small from a percentage.
Thank you for your time today and Brian over to you.
Speaker Change: <unk>, we're optimistic on its long term potential.
Thank you chip and good afternoon, everyone.
Speaker Change: Also at Travis Matthew in 2023, we had an approximately $35 million inventory fill in and in our corporate channel that will not repeat in 2024.
As chip mentioned, we are pleased with how we finished 2023.
Fourth quarter revenue growth across each of our operating segments.
Speaker Change: This will cause some year over year comparison issues for 2024 versus 2023.
Golf opened eight new venues in the fourth quarter alone and finished the year with same venue sales growth of plus 1%.
Excluding this we continue to expect strong revenue growth that Travis Matthew both this year and going forward.
While also increasing venue level adjusted EBITDAR margins by approximately 100 basis points year over year.
Jack will skin margins were challenged in Q4 due to continued softness in Europe, driven by continued high field inventories and despite strong performance in China, both in Q4 and for the full year.
Our golf equipment business finished the year with the number one U S golf equipment market share for golf clubs.
Two in golf balls.
We also achieved positive free cash flow for the year, both on a consolidated basis and at top graph.
Speaker Change: That said the Jack <unk> business grew slightly on the top line.
Those were important financial milestones for us and we achieve them well ahead of our plan that we set at the time of the merger.
And was approximately breakeven EBITDA in 2023 overall.
We remain in a strong financial position, our cash and cash equivalents increased $213 million to $394 million at December 31, 2023 compared to the prior year.
We now have new leadership in place in Europe, and we're optimistic for stabilization followed by growth during the balance of 2024 and into 2025.
Which is after taking to account over $50 million in common stock purchases, including $12 million in the fourth quarter.
Speaker Change: Overall for 2024, we're expecting approximately flat revenues with operating income slightly down in this segment.
And deploying approximately $30 million for the big shots acquisition.
Speaker Change: In.
Our available liquidity, which is comprised of cash on hand, and availability under our credit facilities increased $327 million to $743 million due to proceeds from the company's new term loan and better than expected cash flows this year.
Speaker Change: <unk> two.
Speaker Change: 2023 ended on a strong note and 2024 has begun with exciting new products and programs across our brands.
Speaker Change: We remain confident in our strategic initiatives and our ability to grow our cash flows from a year.
Given the strength of our businesses and our solid financial position. We believe we are well positioned entering 2024, and we expect the growth revenue adjusted EBITDA and embedded cash flow again this year.
Speaker Change: The growth is forecast to be modest for 2024 as we both continue to invest in the business.
Speaker Change: And we are also planning cautiously.
Speaker Change: Cash flow EBITDA, and EPS, then ramp nicely as our cash flow compounds and as we leverage our scale.
Now turning to our fourth quarter results.
We grew consolidated revenues, 5% year over year to $897 million driven by growth across all three operating segments led by top golf venues, which were up 9% and golf clubs, which were up 17%.
Speaker Change: Thank you for your time today and Brian over to you.
Brian: Thank you chip and good afternoon, everyone.
Brian: As chip mentioned, we are pleased with how we finished 2023.
Given the seasonality of our businesses, we typically report an operating loss in the fourth quarter.
Brian: We had fourth quarter revenue growth across each of our operating segments.
Brian: Top golf opened eight new venues in the fourth quarter alone and finished the year with same venue sales growth of plus 1%.
In the fourth quarter of 2023, our non-GAAP operating loss improved 74% to a loss of $6 6 million.
Brian: While also increasing venue level adjusted EBITDAR margins by approximately 100 basis points year over year.
This improvement was driven by a significant improvement in segment operating income in the top golf and active lifestyle segments.
Brian: Our golf equipment business finished the year with the number one U S golf equipment market share for golf clubs and number two in golf balls.
non-GAAP fourth quarter net loss increased to approximately 5.4.
$4 million compared to last year.
Brian: We also achieved positive free cash flow for the year, both on a consolidated basis and at top graph.
Largely due to the increased D&A and interest expense related to new revenue development.
Those were important financial milestones for us and we achieve them well ahead of our plan that we set at the time of the merger.
Adjusted EBITDA of $69 $8 million increased 91% compared to last year and exceeded the high end of our guidance range by approximately $12 million due primarily to better than expected revenue and venue margins are top golf.
Brian: We remain in a strong financial position, our cash and cash equivalents increased $213 million to $394 million at December 31, 2023 compared to the prior year, which is after taking to account over $50 million in common stock purchases, including $12 million in the fourth quarter.
Moving to segment performance.
Top golf Q4 revenue grew 7% driven primarily by new venues, partially offset by better than expected same venue sales of minus 3%.
Brian: And deploying approximately $30 million for the big shots acquisition.
The beat in Q4 same venue sales was driven by better than expected traffic in our one and two bay consumer business, which benefited from a strong holiday season and year over year favorable weather in December.
Brian: Our available liquidity, which is comprised of cash on hand, and availability under our credit facilities increased $327 million to $743 million due to proceeds from the company's new term loan and better than expected cash flows this year.
<unk> operating income increased to $23 million in the fourth quarter compared to $3 million in the prior year and adjusted EBITDA increased $30 million to $73 million.
Brian: Given the strength of our businesses and our solid financial position. We believe we are well positioned entering 2024, and we expect the growth revenue adjusted EBITDA and embedded cash flow again this year.
These improvements were driven primarily by the increased revenue as well as continue operational efficiency gains in the venues.
Brian: Now turning to our fourth quarter results.
Operational gains included improved labor management, the impact of Pi being rolled out in all venues and lower food and beverage costs due to top golfs increased scale.
Brian: We grew consolidated revenues, 5% year over year to $897 million driven by growth across all three operating segments led by top golf venues, which were up 9% and golf clubs, which were up 17%.
Moving to Q4 results for golf equipment.
Revenue increased 5% to $199 million.
Brian: Given the seasonality of our businesses, we typically report an operating loss in the fourth quarter.
Primarily due to an expected shift in golf club launches.
Partially offset by a decline in golf ball sales as we prepare for the 2024 launch of our new Chrome tour ball, which launched on February 2nd.
Brian: In the fourth quarter of 2023, our non-GAAP operating loss improved 74% to a loss of $6 6 million.
This improvement was driven by a significant improvement in segment operating income in the top golf and active lifestyle segments.
Golf equipment operating income decreased $21 million due to the expected lower production volumes in the second half of 2023 as compared to the prior year, resulting in an unfavorable cost absorption as.
Brian: non-GAAP fourth quarter net loss increased approximately $5 four.
Brian: $4 million compared to last year.
As well as a return to normal promotional levels as we mentioned last quarter.
Brian: Largely due to the increased D&A and interest expense related to new venue development.
Interactive lifestyle segment Q4 revenue grew 3% primarily due to increased apparel sales, which was led by Travis Matthew.
Brian: Adjusted EBITDA of $69 8 million increased 91% compared to last year and exceeded the high end of our guidance range by approximately $12 million due primarily to better than expected revenue and venue margins at top golf.
Operating income increased to $20 million compared to breakeven in the prior year.
This increase was driven by increased revenue and margin as a result of a higher mix of margin accretive direct to consumer sales as well as tailwind from lower input costs year over year.
Brian: Moving to segment performance at top golf Q4 revenue grew 7% driven primarily by new venues, partially offset by better than expected same venue sales of minus 3%.
Moving to balance sheet and liquidity highlights as I mentioned earlier at December 31, 2023, our available liquidity increased $327 million to $743 million compared to the prior year due to proceeds from the company's new term loan and better than expected cash for.
Brian: The beat in Q4 same venue sales was driven by better than expected traffic in our one and two bay consumer business, which benefited from a strong holiday season and year over year favorable weather in December.
This year.
Brian: <unk> operating income increased to $23 million in the fourth quarter compared to $3 million in the prior year and adjusted EBITDA increased $30 million to $73 million.
At year end, we had a total net debt of $2 2 billion.
Which excludes convertible debt of approximately $258 million compared to $1 9 billion at the end of 2022.
Brian: These improvements were driven primarily by the increased revenue as well as continue operational efficiency gains in the venues.
This increase relates primarily to incremental new venue financing and the additional $300 million of <unk>.
Brian: The operational gains included improved labor management, the impact of Pi being rolled out in all venues and lower food and beverage costs due to tough comps increased scale.
Loan debt.
As a reminder, we think it is also helpful to evaluate our net leverage position by excluding the venue financing REIT debt, which is essentially capitalized rent with no additional principal or bullet repayment required.
Brian: Moving to Q4 results for golf equipment.
Brian: Revenue increased 5% to $199 million.
Including the REIT that a REIT adjusted net debt is $971 million at the end of 2023 compared to $997 million at the end of 2022.
Brian: Primarily due to an expected shift in golf club launches.
Brian: Partially offset by a decline in golf ball sales as we prepare for the 2024 launch of our new Chrome tour ball, which launched on February <unk>.
Our net debt leverage which excludes convertible debt.
With three eight times at December 31, 2023, compared to three four times.
Brian: Golf equipment operating income decreased $21 million due to the expected lower production volumes in the second half of 2023 as compared to the prior year, resulting in an unfavorable cost absorption as.
Year end 2022.
This change was driven by the opening of additional venues in Q4 2023 versus the prior year.
Brian: As well as a return to normal promotional levels as we mentioned last quarter.
A REIT adjusted net debt leverage ratio was one nine times compared to 2.0 times in the prior year.
Brian: Interactive lifestyle segment Q4 revenue grew 3% primarily due to increased apparel sales, which was led by Travis Matthew.
We feel comfortable with these leverage levels.
Our inventory balance decreased to $165 million or 17% from $959 million at year end 2000 $22 million to $794 million at the end of 2023.
Operating income increased to $20 million compared to breakeven in the prior year.
Brian: This increase was driven by increased revenue and margin as a result of a higher mix of margin accretive direct to consumer sales as well as tailwind from lower input costs year over year.
A significant achievement by our teams who actually manage this inventory reduction in light of the post COVID-19 surge in 2022.
Moving to balance sheet and liquidity highlights as I mentioned earlier at December 31, 2023, our available liquidity increased $327 million.
We continue to expect our active lifestyle image of our inventory to decrease in 2024 is our apparel business is normalized their inventory.
We feel good about the quality of our inventory.
Brian: $743 million compared to the prior year due to proceeds from the company's new term loan and better than expected cash flow this year.
Capital expenditures for the 12 months ended December 31, 2023 were $482 million and we received reimbursements of $277 million.
Brian: At year end, we had a total net debt of $2 2 billion.
From a REIT arrangements for net capital expenditures of $205 million of which a $146 million is related to top golf.
Brian: Which excludes convertible debt of approximately $258 million.
Brian: Compared to $1 9 billion at the end of 2022.
Brian: This increase relates primarily to incremental new venue financing and the additional $300 million of <unk>.
Net capex was approximately $30 million lower than our $240 million guidance due to the timing of reimbursements.
Brian: Term loan debt.
Brian: As a reminder, we think it is also helpful to evaluate our net leverage position by excluding the venue financing reap debt, which is essentially capitalized rent with no additional principal or bullet repayment required.
Consolidated free cash flow and embedded cash flow were $160 million and $221 million respectively. Both ahead of expectations.
As a reminder, embedded cash flow with free cash flow minus growth capex for new venues and retail stores.
Brian: Excluding the reef that a REIT adjusted net debt is $971 million at the end of 2023 compared to $997 million at the end of 2022.
This metric provides a good view of the cash generation power of our business as it stands today and it eliminates the noise from the timing of reimbursement.
Brian: Our net debt leverage which excludes convertible debt.
Looking ahead, we believe we will grow embedded cash flow in 2024.
With three eight times at December 31, 2023, compared to three four times.
In light of FX headwinds and continued corporate infrastructure investments. This year the growth in embedded cash flow is expected to be modest in 2024, but ramp in 2025 through 2028.
Brian: Year end 2022.
Brian: This change was driven by the opening of additional venues in Q4 2023 versus the prior year.
Brian: <unk> adjusted net debt leverage ratio was one nine times compared to 2.0 times in the prior year we.
We also expect to remain free cash flow positive both in our consolidated business as well as top golf.
Brian: We feel comfortable with these leverage levels.
Given our better than expected cash generation in 2023, and assuming we are on plan for 2024, we would expect to begin paying down our term loan debt later in 2024.
Brian: Our inventory balance decreased to $165 million or.
Brian: Or 17% from $959 million at year end 2000, $22 million to $794 million at the end of 2023 <unk>.
I would now like to provide an update on our outlook for 2024.
Brian: A significant achievement by our teams who actually manage this inventory reduction in light of the post COVID-19 surge in 2022.
Our outlook reflects both our confidence in our business as well so potentially softer consumer environment in 2024.
Brian: We continue to expect our active lifestyle image of our inventory to decrease in 2024 is our apparel business is normalized their inventory.
All in all we expect revenue EBITDA and embedded cash flow growth in 2024.
As I mentioned last quarter, we are in phase two of our top golf journey and.
Brian: We feel good about the quality of our inventory.
Brian: Capital expenditures for the 12 months ended December 31, 2023 were $482 million and we received reimbursements of $277 million from a REIT arrangements for net capital expenditures of $205 million of which a $146 million is related to top golf.
In phase one we funded top golfs operations and venue development.
This phase was very successful as we increase the pace of new venue development and at the same time improve venue profitability, resulting in significant revenue and adjusted EBITDA growth.
As expected. However, this accelerated development had a negative impact on earnings per share due to the increased interest expense and D&A associated with that development.
Brian: Net capex was approximately $30 million lower than our $240 million guidance due to the timing of reimbursements.
<unk> is now free cash flow positive and self funding with our developer led financing and we have moved to phase III.
Brian: Consolidated free cash flow and embedded cash flow were $160 million and $221 million respectively. Both ahead of expectations.
The phase II, which will we will be in through 2024, we expect to scale our business further grow embedded cash flows and stabilize EPS.
As a reminder, embedded cash flow with free cash flow minus growth capex for new venues and retail stores.
Brian: This metric provides a good view of the cash generation power of our business as it stands today and it eliminates the noise from the timing of reimbursements.
We also expect to be at the tail end of our post merger investments in corporate infrastructure.
In 2025 through 2028, we expect to be in phase three of our top golf journey, where we will have further growth in our cash flows begin to meaningfully exceed our capital requirements.
Brian: Looking ahead, we believe we will grow embedded cash flow in 2024.
Brian: In light of FX headwinds and continued corporate infrastructure investments. This year the growth in embedded cash flow is expected to be modest in 2024, but ramp in 2025 through 2028.
As a result of the increased scale leveling of corporate investments and the impact of the cash flow generation on the interest expense.
We would expect EPS to begin to grow in 2025 and ramp from there.
Brian: We also expect to remain free cash flow positive both in our consolidated business as well as top golf.
Before moving to specific 2024 guidance I want to highlight why we have so much confidence in the long term performance of this business.
Brian: Given our better than expected cash generation in 2023, and assuming we are on plan for 2024.
We refer you to slide 18, which depicts 2023 adjusted EBITDAR margin by venue cohort.
Brian: Would expect to begin paying down our term loan debt later in 2024.
As you know our venues opening well and quickly ramp to attractive revenue margin and profit generation.
Speaker Change: I would now like to provide an update on our outlook for 2024.
This is consistently true in an attractive element of the top golf business.
Speaker Change: Our outlook reflects both our confidence in our business as well so potentially softer consumer environment in 2024.
As shown on slide 18, you can see that the venue adjusted EBITDAR margin not only doesn't decrease with age of the venue, but if anything it actually increases with age.
All in all we expect revenue EBITDA and embedded cash flow growth in 2024.
And this effect is even more pronounced when looking at venue pretax income due to the DNA being somewhat frontloaded in the first five years.
Speaker Change: As I mentioned last quarter, we are in phase two of our top golf journey.
Speaker Change: Phase one refunded top golfs operations.
Overall, it is clear the top golf venues open with strong economics that improve over time and the venues are appreciating assets over the long term.
Speaker Change: In venue development.
Speaker Change: This phase was very successful as we increase the pace of new venue development and at the same time improve venue profitability, resulting in significant revenue and adjusted EBITDA growth.
At present, approximately half of our venues opened in the last five years.
Speaker Change: As expected. However, this accelerated development had a negative impact on earnings per share due to the increased interest expense and D&A associated with that development.
Accordingly, we expect the profit contribution from our venues to expand over time.
With that said, let's turn to 2020 for guidance.
<unk> is now free cash flow positive and self funding with our developer led financing and we have moved to phase III.
Looking at our 2024 guide Holistically as Chip mentioned, we view 2024, as an investment year in which we are focused on driving the digital transformation of Dot Gov.
Speaker Change: The phase II, which will we will be in through 2024, we expect to scale our business further grow embedded cash flows and stabilize EPS.
And separately, largely finishing necessary post merger investments in corporate infrastructure, including information technology systems and cyber security.
Speaker Change: We also expect to be at the tail end of our post merger investments in corporate infrastructure.
Now, let's look at more specific guidance for 2024.
Speaker Change: In 2025 through 2028, we expect to be in phase three of our top golf journey, where we will have further growth in our cash flows begin to meaningfully exceed our capital requirements.
There will be a few headwinds as we enter 2024. In addition to the investments I just mentioned.
First there is the revenue headwinds in the active lifestyle business, a chip called out earlier.
As a result of the increased scale leveling of corporate investments and the impact of the cash flow generation and interest expense, we would expect EPS to begin to grow in 2025 and ramp from there.
The second is related to foreign currency and.
In addition to unfavorable translation based on recent rates Theyre also foreign currency hedging gains in 2023 of approximately $13 4 million that will not repeat in 2024.
Speaker Change: Before moving to specific 2024 guidance I want to highlight why we have so much confidence in the long term performance of this business.
Overall, we estimate these foreign currency changes will negatively impact revenue by approximately $10 million and adjusted EBITDA by approximately $20 million.
Speaker Change: I refer you to slide 18, which depicts 2023 adjusted EBITDAR margin by venue cohort.
Lastly, the top golf business will be lapping a 11% growth in same venue sales in Q1, 2023, which was partially due to a post COVID-19 surge in our events business, which is resulting in a same venue sales estimates are down high single digits in Q1 and flat for the full year.
Speaker Change: As you know our venues opened well and quickly ramped to attractive revenue margin and profit generation.
This is consistently true in an attractive element of the top golf business.
Speaker Change: As shown on slide 18, you can see that the venue adjusted EBITDAR margin not only doesn't decrease with age of the venue, but if anything it actually increases with age.
As compared to 2023.
For 2024, we anticipate consolidated net revenue growth of approximately 6% versus the prior year to $4 $5 five to $4 $55 5 billion.
Speaker Change: And this effect is even more pronounced when looking at venue pretax income due to the DNA being somewhat frontloaded in the first five years.
Speaker Change: Overall, it is clear the top golf venues opened with strong economics that improve over time and the venues are appreciating assets over the long term.
Consolidated revenue growth is expected to be driven by low single digit growth in the golf equipment segment.
And growth of approximately 11% at top golf.
Speaker Change: At present, approximately half of our venues opened in the last five years.
The top graph growth is primarily due to new venue growth.
Speaker Change: Accordingly, we expect the profit contribution from our venues to expand over time.
Moving to 2020 for adjusted EBITDA, we're guiding to a range of $620 to $640 million, which would represent.
Speaker Change: With that said, let's turn to 2020 for guidance.
Present growth of 4% to 7% approximately commensurate with the projected revenue growth.
Looking at our 2024 guide Holistically as Chip mentioned, we view 2024, as an investment year in which we are focused on driving the digital transformation of Dot Gov.
As mentioned earlier, we would expect to begin to see leverage in 2025, we are projecting top golf adjusted EBITDA to be approximately $350 million or 17, 9% margin, which would be approximately 60 basis points of expansion on a year over year basis.
Speaker Change: And separately, largely finishing necessary post merger investments in corporate infrastructure, including information technology systems and cyber security.
Speaker Change: Now, let's look at more specific guidance for 2024.
We expect non-GAAP diluted EPS was <unk> 26 to <unk> 34.
Speaker Change: There will be a few headwinds as we enter 2024. In addition to the investments I just mentioned.
Compared to <unk> 49 this year.
Speaker Change: First there is the revenue headwind in the active lifestyle business, a chip called out earlier.
This decrease was primarily due to increased depreciation and amortization expense.
Speaker Change: The second is related to foreign currency.
As well as increased venue financing interest due to additional venues.
Speaker Change: In addition to unfavorable translation based on recent rates.
We have included in the Investor deck today on slide 23, and estimated walk from EBITDA to EPS for 2024.
Speaker Change: There are also foreign currency hedging gains in 2023 of approximately $13 $4 million that will not repeat in 2024.
Finally, we expect to spend approximately $475 million in gross capital expenditures in 2024 compared to $482 million in 2020.
Speaker Change: Overall, we estimate these foreign currency changes will negatively impact revenue by approximately $10 million and adjusted EBITDA by approximately $20 million.
Speaker Change: Lastly, the top golf business will be lapping a 11% growth in same venue sales in Q1, 2023, which was partially due to a post COVID-19 surge in our events business.
The decrease was due to less new venue development in 2024 compared to the prior year.
We estimate reimbursements of $214 million in 2024.
Compared to $277 million in 2023.
Speaker Change: Which is resulting in a same venue sales estimates are down high single digits in Q1 and flat for the full year, both as compared to 2023.
Now turning to Q1, specifically.
In Q1, we expect consolidated revenue of $1, one four to $1 6 billion.
Speaker Change: For 2024, we anticipate consolidated net revenue growth of approximately 6% versus the prior year to $4 $505 two for $5 $5 5 billion.
Flat to slightly down versus 2023.
This decrease was largely related to the active lifestyle corporate channel headwind chip mentioned and top golfs expected decrease in Q1 <unk> sales.
Speaker Change: Consolidated revenue growth is expected to be driven by low single digit growth in the golf equipment segment.
We also expect Q1, adjusted EBITDA of $130 million to $140 million compared to $157 million in the prior year.
Speaker Change: And growth of approximately 11% at top golf.
The top graph growth is primarily due to new venue growth.
This decrease was primarily related to the flat to down revenue combined with projected unfavorable FX and the 2024 investments.
Speaker Change: Moving to 2020 for adjusted EBITDA, we're guiding to a range of $620 to $640 million, which would represent growth of 4% to 7%.
These factors along with increased D&A and interest expense related to new venues will negatively impact first quarter, Etfs, which we estimate to be approximately breakeven to a slight loss compared to 17 last year.
Speaker Change: Approximately commensurate with projected revenue growth.
Speaker Change: As mentioned earlier, we would expect to begin to see leverage in 2025, we are projecting top golf adjusted EBITDA to be approximately $350 million or 17, 9% margin, which would be approximately 60 basis points of expansion on a year over year basis.
We have provided today in the investor presentation, a lot of new and more detailed information in response to investor inquiries.
I Hope you find this information helpful.
Overall, we're pleased with where we are as a business.
Speaker Change: We expect non-GAAP diluted EPS was <unk> 26 to 34.
<unk> significant headwinds since the merger from unfavorable foreign currency and rising interest rates, we have achieved greater growth in cash flow than we expected at the time of the merger.
Speaker Change: Compared to <unk> 49 this year.
Speaker Change: This decrease was primarily due to increased depreciation and amortization expense as.
We're also encouraged that we are at the tail end of our post merger investments and are beginning to capture the synergies with top golf as Jeff described.
Speaker Change: As well as increased venue financing interest due to additional venues.
Speaker Change: We have included in the Investor deck today on slide 23, and estimated walk from EBITDA to EPS for 2024.
We are excited about the progress we have made since the merger in beginning in 2025, we expect to reach the scale and infrastructure necessary to begin ramping a better cash flow and earnings.
Speaker Change: Finally, we expect to spend approximately $475 million in growth capital expenditures in 2024 compared to $482 million in 2020.
We look forward to reporting to you on our progress.
We will now open the call for questions operator over to you.
Speaker Change: The decrease was due to less new venue development in 2024 compared to the prior year.
We will now begin the question and answer session.
Speaker Change: We estimate reimbursements of $214 million in 2024.
To ask a question you May press Star then one on your telephone keypad.
Speaker Change: Compared to $277 million in 2023.
If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: Now turning to Q1, specifically.
In Q1, we expect consolidated revenue of $1, one four to $1 6 billion.
To withdraw your question. Please press Star then two.
Please limit yourselves to one question. If you have additional questions you may reenter the queue. At this time, we will pause momentarily to assemble our roster.
Speaker Change: Flat to slightly down versus 2023.
Speaker Change: This decrease was largely related to the active lifestyle corporate channel headwind chip mentioned.
Speaker Change: And top golfs expected decrease in Q1 same venue sales.
Speaker Change: We also expect Q1, adjusted EBITDA of $130 million to $140 million compared to $157 million in the prior year.
The first question is from Alex Perry with Bank of America. Please go ahead.
Hi, Thanks for taking my question here.
Speaker Change: This decrease was primarily related to the flat to down revenue combined with projected unfavorable FX and the 2024 investments.
So I just wanted to ask what does the flat top golf competency you assume in terms of walk in versus corporate maybe just give us some help in terms of how youre thinking about those two pieces of the business.
Speaker Change: These factors along with increased D&A and interest expense related to new venues will negatively impact first quarter, Etfs, which we estimate to be approximately breakeven to a slight loss compared to 17 last year.
Would you expect the corporate events business to return positive following the <unk> against the easier comps and what are your sort of forward bookings, indicating it looks like that accelerated a bit in the fourth quarter is that a trend you expect to continue thank you.
Speaker Change: We have provided today in the investor presentation, a lot of new and more detailed information in response to investor inquiries.
Sure Alex this is Jeff.
I Hope you find this information helpful.
So.
Speaker Change: Overall, we were pleased with where we are as a business.
For Q1, we're expecting a tough comp as.
Speaker Change: <unk> significant headwinds since the merger from unfavorable foreign currency and rising interest rates, we have achieved greater growth in cash flow than we expected at the time of the merger.
You would expect.
Overall that specifically in the corporate business.
The corporate business was still at that post Covid surge point.
Speaker Change: We're also encouraged that we are at the tail end of our post merger investments and are beginning to capture the synergies with top golf as Jeff described.
In the first quarter last year, and then we saw the change in trend after that.
Speaker Change: We are excited about the progress we have made since the merger in beginning in 2025, we expect to reach the scale and infrastructure necessary to begin ramping a better cash flow and earnings.
After first quarter.
We do expect corporate events to stabilize.
And.
Yes.
We're already seeing that you can see that in the data right now the walk in business has been stable over the last several quarters.
Speaker Change: We look forward to reporting to you on our progress.
We will now open the call for questions operator over to you.
Speaker Change: We will now begin the question and answer session.
And.
We do expect that to.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Improved through the year as well so we're seeing an improving trend we have easier comps after Q1.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
<unk>.
Pretty.
Speaker Change: To withdraw your question. Please press Star then two.
Clear direction I think in terms of what we've seen in consistency with what we've seen over the last.
Speaker Change: Please limit yourselves to one question.
If you have additional questions you may reenter the queue at this time, we will pause momentarily to assemble our roster.
Four or five months.
Perfect. That's really helpful best of luck going forward.
<unk>.
The next question is from Megan Alexander with Morgan Stanley. Please go ahead.
Speaker Change: The first question is from Alex Perry with Bank of America. Please go ahead.
Yeah. Thanks could you maybe just a follow up on that is there any way to quantify the weather impact to January and whether you've seen many sales improve.
Alex Perry: Hi, Thanks for taking my question here.
Alex Perry: I just wanted to ask what does the flat top golf competency you assume in terms of walk in versus corporate maybe just give us some help in terms of how youre thinking about those two pieces of the business.
From that level.
Megan we saw headwinds from weather in January we saw tailwind from weather in December which is somewhat what you would expect this time of year some volatility around that.
Alex Perry: Would you expect the corporate events business to return positive following the <unk> against the easier comps and what are your sort of forward bookings, indicating it looks like that accelerated a bit in the fourth quarter is that a trend you expect to continue thank you.
In January the weather headwind was roughly about 200 250 basis points relative to the full quarter.
Alex Perry: Sure Alex this is Jeff.
Alex Perry: So.
We don't read too much into that other than that's one of these things that happen.
Jeff: For Q1, we're expecting a tough comp as well.
At this time of year the trends that we were seeing in.
Jeff: You would expect.
Jeff: Overall, but specifically in the corporate business.
Really for the second half of last year.
Jeff: Corporate business was still at that post Covid surge point.
Indeed, the trends that are continuing and we feel good about the direction overall of our.
Jeff: In the first quarter last year, and then we saw the change in trend after that.
Same venue sales with some clear.
Opportunities that we've talked about what the midweek promotions in the digital efforts and other initiatives that we're developing that we think will have a positive impact on the St. Many SaaS.
After first quarter, we do expect corporate events to stabilize.
Jeff: And.
Jeff: Yes.
Jeff: Already seeing that you can see that in the data right now the walk in business has been stable over the last several quarters.
Super helpful. I guess, maybe to that point on some of the midweek promotions Youre doing I think you ran some cash during the fourth quarter I guess, how do you make sure that you have been doing this on Tuesday, as well, but how do you make sure that it doesn't cannibalize some of the weekend traffic you're seeing.
Jeff: And.
Jeff: We do expect that to.
Jeff: Improved through the year as well so we're seeing an improving trend we have easier comps after Q1.
Jeff: And.
Well, we track that specifically and.
Jeff: Pretty.
Jeff: Clear direction I think in terms of what we've seen in consistency with what we've seen over the last.
That is indeed, the one thing that we were most guarded against so.
Our results have indeed shown that it not only doesn't cannibalize the weekends.
Jeff: Four or five months.
Speaker Change: Perfect. That's really helpful best of luck going forward.
<unk> additive from a traffic perspective, and therefore net profitable and we're obviously also relatively measured in the promotion that we're now implementing half off game play only through the App.
Speaker Change: Thank you.
Speaker Change: The next question is from Megan Alexander with Morgan Stanley. Please go ahead.
Casey Alexander: Yeah. Thanks could you maybe just to follow up on that is there any way to quantify the weather impact to January and whether you've seen that many sales improve from that level.
Which is not too dissimilar from what we saw on the Tuesday.
But we think that it will have a positive impact.
Casey Alexander: Megan we saw headwinds from weather in January we saw tailwind from weather in December which is somewhat what you would expect this time of year some volatility around that.
And we did indeed trial that before we implement it.
The next question is from Randal <unk> with Jefferies. Please go ahead.
Hey, good evening everybody.
Casey Alexander: In January the weather headwind was roughly about 200 250 basis points relative to the full quarter.
I guess, Brian maybe if you could give us some perspective on we know the comp guide for the first quarter. We know the comp guide for top golf, I'm, saying I'm talking about.
Casey Alexander: We don't read too much into that other than that's one of these things that happen.
The year around flat.
Can you give us a little perspective of how we should be thinking about that comp trajectory.
Casey Alexander: At this time of year the trends that we were seeing in.
Throughout the year and then back on the mid week business for top golf versus the weekend business could you just give us some maybe frame it out a little bit on what's the difference.
Casey Alexander: Really for the second half of last year.
Casey Alexander: Or indeed, the trends that are continuing and we feel good about the direction overall of our.
Is the trend in midweek versus weekend are you still seeing a very stable solid business on the weekends and the midweek has just been the problem that should be solved in the next quarter or so just to give us a little flavor on how we should be thinking about the trajectory.
Casey Alexander: Same venue sales with some clear.
Casey Alexander: Opportunities, we've talked about with the midweek promotions in the digital efforts and other initiatives that we're developing that we think will have a positive impact on the St. Many SaaS.
Top golf comps overall throughout the quarters, and then mid week versus weekend would be super helpful. Thanks, guys.
Speaker Change: Super helpful. I guess, maybe to that point on some of the midweek promotions Youre doing I think you ran some tests during the fourth quarter I guess, how do you make sure that you have been doing this on Tuesday, as well, but how do you make sure that it doesn't cannibalize some of the weekend traffic you're seeing.
Hey, Randy it's chip I'm going to jump in on this one.
And then Brian if you have anything to add jump in.
We are still seeing strong results on the weekends. So the weekends are continuing to comp positively for us as we mentioned last quarter. So.
Speaker Change: Well, we track that specifically and.
Speaker Change: That is indeed, the one thing that we were most guarded against so.
No change in trend on that.
And through Q4, we continued to see a weaker overall.
Speaker Change: Our results have indeed shown that it not only doesn't cannibalize the weekends, it's additive from a traffic perspective, and therefore net profitable and we're obviously also relatively measured in the promotion that we're now implementing half off game play only through the <unk>.
Our result in the consumer business mid week.
So those are consistent and.
It's also a good news story, because we can be targeted about how we address that.
Speaker Change: <unk>.
Specifically with it only being a midweek issue on the consumer portion of our business.
Speaker Change: Which is not too dissimilar from what we saw on the Tuesday.
Speaker Change: But we think that it will have a positive impact.
And then in terms of how it's going to or at least we're forecasting it to work through the full year in terms of the same venue sales.
Speaker Change: And we did indeed trial that before we implement it.
Speaker Change: The next question is from Randal <unk> with Jefferies. Please go ahead.
The math works that we're projecting a high single digit down in.
Randal: Hey, good evening everybody.
Q1, after a big comp gain a year ago in Q1.
Randal: I guess, Brian maybe if you could give us some perspective on we know the comp guide for the first quarter. We know the comp guide for top golf, I'm, saying I'm talking about for the year around flat.
Hi.
And then.
For the balance of the year low to mid single digits positive to get us to that.
Randal: Can you give us a little perspective of how we should be thinking about that comp trajectory.
Flat number for the full year.
Great. Thanks, so much.
Randal: Throughout the year and then back on the mid week business for top golf versus the weekend business could you just give us some maybe frame it out a little bit on what's the difference.
Thank you.
Next question is from Daniel <unk> with Stephens, Inc. Please go ahead.
Yeah, Hey, good evening, everybody. Thanks for taking our question.
To me ill get away from the trend here I'll ask about the non top call part of the business trying to look through the guidance a little bit obviously, you talked about that a lot of exciting synergies and momentum, but if we strip out top golf EBITDA from total it looks like kind of remaining EBITDA will be down year over year and 24 I know in 2003, we had headwinds in the golf equipment from.
Randal: Is the trend in midweek versus weekend are you still seeing a very stable solid business on the weekends and the midweek has just been the problem that that should be solved in the next quarter or so just to give us a little flavor on how we should be thinking about the trajectory.
Randal: Top golf comps overall throughout the quarters, and then mid week versus weekend would be super helpful. Thanks, guys.
Lower production, but can you maybe walk the puts and takes around why that core or non top golf EBITDA will be lower year over year, Brian in the guidance.
Randal: Hey, Randy it's chip I'm going to jump in on this one.
Chip: Then Brian if you have anything to add jump in.
Chip: We are still seeing strong results on the weekends. So the weekends are continuing to comp positive play for us as we mentioned last quarter. So.
Brian why don't you take that one and then I'll jump in sure on the non comp.
Just want to remind you that FX is going to be a headwind next year.
Talked about $10 million revenue, but theres also.
No change in trend on that.
Some hedge gains of about $30 $40 million that are going going away.
Chip: And through Q4, we continued to see a weaker overall.
And then there is a bunch of investments that we talked about during our script.
Chip: Result in the consumer business mid week.
Corporate business as well.
So that's probably $30 million.
Brian: So those are consistent and.
Headwind right there.
It's also a good news story, because we can be targeted about how we address that.
Sure.
Yes.
Okay.
And then Daniel we are seeing the golf equipment business, we are projecting that to be.
Specifically with it only being a mid week issue on the consumer portion of our business.
Mid to high single digits.
This coming year.
Brian: And then in terms of how it's going to.
The active lifestyle roughly flat.
Brian: Or at least we're forecasting it to work through the full year in terms of the same venue sales.
Golf equipment business increasing profitability.
Brian: The math works that we're projecting a high single digit down in.
Active lifestyle.
<unk> flat to slightly down.
Brian: Q1, after a big comp gain a year ago in Q1.
Helpful color I'll take the rest offline thanks guys.
The next question is from Kate Mcshane with Goldman Sachs. Please go ahead.
And then.
Brian: For the balance of the year low to mid single digits positive to get us to that.
Hi, Thank you for taking our question.
Just with regards to the new innovation AI smoke.
Brian: Flat number for the full year.
How big of a launches this relative to the paradigm with the chrome toward golf ball is there.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Next question is from Daniel <unk> with Stephens, Inc. Please go ahead.
Significant price differential between that.
Price.
Daniel: Yeah, Hey, good evening, everybody. Thanks for taking our question.
Sure Kate.
Let me start on golf ball Golf ball. This is a bigger launch for us than we have had last year.
Daniel: To me ill get away from the trend here ask about the non top call part of the business trying to look through the guidance a little bit obviously, you talked about that a lot of exciting synergies and momentum, but if we strip out top golf EBITDA from total it looks like kind of remaining EBITDA will be down year over year in 'twenty four 'twenty three we had headwinds in the golf equipment.
It's our premium ball launch and in fact, it's basically a new brands that we're introducing to the market. So on the golf ball side.
Big launch big opportunity.
Pricing.
Daniel: Lower production, but can you maybe walk the puts and takes.
Is up on this product versus where we were previous as well.
Daniel: Why the core or the non top golf EBITDA will be lower year over year, Brian in the guidance.
And relative to the average ball.
Daniel: Brian why don't you take that one and then I'll jump in sure and then the non comp.
The higher price point in fact this is matches.
The price points of the most premium golf balls that have any market share in the in the market.
Brian: Again, just to remind you that FX was going to be a headwind next year, we've talked about $10 million revenue, but theres also.
In the club side of the game the AI smoke is a very significant launch for us in a very.
Brian: Some hedge gains of about $30 $40 million that are going going away.
Brian: And then there is a bunch of investments that we talked about during our script.
Comprehensive.
Brian: Corporate business as well.
It's similar in terms of scale to paradigm.
Brian: So that's probably $30 million.
Potentially the one.
Brian: Headwind right there.
Key differences in the irons.
Brian: Sure.
Brian: Yes.
Of that and that we're launching the irons for AI smoke at a.
Brian: Okay.
Brian: And then Daniel we are seeing the golf equipment business, we are projecting that to be.
Price point that fits a larger portion of the market. The paradigm iron was priced in a premium category.
Brian: Up mid to high single digits.
Brian: This coming year.
Brian: The active lifestyle roughly flat.
Whereas AI smoke is more consistent with our irons that are historically established higher market share positions.
Brian: Golf equipment business increasing profitability.
Brian: Active lifestyle.
Brian: Flat to slightly down.
Thank you.
Speaker Change: Helpful color I will take the rest offline thanks guys.
The next question is from Casey Alexander with Compass Point Research. Please go ahead.
Speaker Change: The next question is from Kate Mcshane with Goldman Sachs. Please go ahead.
That last question was my question, so I'll step back in the queue. Thank you.
Kate Mcshane: Hi, Thank you for taking our question.
Hey.
Kate Mcshane: Just with regards to the new innovation AI smoke.
And the next question is from Joe <unk> with Raymond James. Please go ahead.
Kate Mcshane: How big of a launch of this relative to the paradigm with the chrome toward golf ball is there.
Thanks, Hey, guys. Good afternoon first question quick one just to clarify because I think earlier, you said youre expecting golf equipment revenue to be up low single digits and I think just now you said mid to high so.
Kate Mcshane: A significant price differential between that.
Kate Mcshane: Price.
Speaker Change: Sure Kate.
Kate Mcshane: Let me start on golf ball Golf ball. This is a bigger launch for us than we have had last year.
Maybe I heard two different things I, just wanted to clarify that.
Yes, Joe we are mid to high is the estimate for golf equipment, I'm, sorry, low to mid low to mid is the estimate for golf equipment. If I misspoke earlier low to mid is the correct number.
Kate Mcshane: It's our premium ball launch and in fact, it's basically a new brands that we're introducing to the market. So on the golf ball side.
Okay in terms of that growth how much of that is coming from from pricing, obviously with the new ball launch.
Kate Mcshane: Our big launch big opportunity.
Kate Mcshane: Pricing.
Kate Mcshane: Is up on this product versus where we were previous as well.
New club launch this year et cetera.
Not much of it from pricing this year.
Kate Mcshane: And relative to average ball.
The club side of it is pretty consistent pricing as mentioned the irons.
Kate Mcshane: The higher price point in fact this is matches.
Is at.
Kate Mcshane: The price points of the most premium golf balls.
Slightly lower price point than the paradigm iron.
Kate Mcshane: Have any market share in the in the market.
<unk>.
Was a higher price point, so it's not.
In the club side of the game the AI smoke is a very significant launch for us in a very.
A significant move.
Move in terms of pricing this year.
Kate Mcshane: Comprehensive.
Okay. Thank you.
Kate Mcshane: It's similar in terms of scale to paradigm.
The next question is from John Kernan with Cowen. Please go ahead.
Kate Mcshane: Potentially the one.
Excellent excuse me thank you.
Kate Mcshane: Key differences in the irons.
I guess chip can you talk about the synergies and quantify that a little bit more between odd.
<unk> of that and that we are launching the irons for AI smoke at a.
Kate Mcshane: Price point that fits a larger portion of the market. The paradigm iron was priced in a premium category.
On course, and off course golf and how much those are embedded in your targets as you push into fiscal 'twenty six and then 28.
Kate Mcshane: Whereas AI smoke is more consistent with our irons that are historically established higher market share positions.
The way out of India.
Our presentation today.
Sure the synergies are.
And ongoing effort John that we're unlocking here and if you look at the journey we've been on we've.
Speaker Change: Thank you.
Speaker Change: The next question is from Casey Alexander with Compass Point Research. Please go ahead.
Clearly added.
Cost savings synergies with shared costs across the business, we purely ramped the growth rate of.
Casey Alexander: The last question was my question, so I'll step back in the queue. Thank you.
Casey Alexander: Hey.
Top golf.
Casey Alexander: And the next question is from Joe <unk> with Raymond James. Please go ahead.
Strength in that overall organization, we believe.
Joe: Thanks, Hey, guys good afternoon.
And they are demonstrating some of the results there and we're really now moving into the more.
Joe: Question quick one just to clarify because I think you said, you're expecting golf equipment revenue to be up low single digits and I think just now you said mid to high so.
<unk>.
Exciting stages from our brand.
Joe: Maybe I heard two different things I, just wanted to clarify that.
Digital and a revenue perspective.
Yes, Joe we are mid to high is the estimate for golf equipment, I'm, sorry, low to mid low to mid is the estimate for golf equipment. If I misspoke earlier low to mid is the correct number.
So we're well ahead of where we expected to deliver in terms of the operational efficiencies the cost of capital if you would.
Growth rates that we're delivering.
Okay in terms of that growth how much of that is coming from from pricing, obviously with the new ball launch new.
Sourcing synergies all of those have been.
Joe: A new club launch this year et cetera.
Realized as per our expectation and as shown in the deck and now we're getting our arms around these digital synergies.
Speaker Change: Not much of it from pricing this year.
Speaker Change: The club side of it is pretty consistent pricing as mentioned the irons.
Brand synergies et cetera that we think can drive some significant market share in.
Speaker Change: Is at a.
Speaker Change: Slightly lower price point than the paradigm iron.
Revenue growth and brand strength over the coming years.
Speaker Change: <unk>.
Speaker Change: Was a higher price point, so it's not.
Got it thank you and then maybe Brian.
Speaker Change: A significant move.
Slide 24 that you have in the deck today.
Speaker Change: Move in terms of pricing this year.
You show the change in leverage ratio. If you were to consider that then your financing.
Speaker Change: Okay. Thank you.
Speaker Change: The next question is from John Kernan with Cowen. Please go ahead.
Rent versus.
Speaker Change: Excellent.
Let's now largely considered interest expense would you consider changing the way you report a two turn difference in.
John Kernan: Thank you.
John Kernan: I guess chip can you talk about the synergies and quantified a little bit more between odd.
Leverage ratio is pretty significant at this point.
John Kernan: On course, and off course golf and how much those are embedded in your targets as you push into fiscal 'twenty six and then 28.
And just move the.
The interest expense, but then you're financing interest expense considerate rent at this point.
Speaker Change: I'll lay out EMEA.
Theres, obviously, no principal due on any of that.
Speaker Change: Our presentation today.
Sure the synergies are.
The landlord financing.
It looks like the market is penalizing you for some of the leverage on the balance sheet, but you consider any changes to.
Chip: And ongoing effort John that we're unlocking here and if you look at the journey we've been on we've.
How does the street in your reporting.
We agree with you we think that is a better way to look at it since there is no bullet or payment at the end and that's why we tend to focus more on that.
Chip: Clearly added.
Chip: Cost savings synergies with shared costs across the business, we purely ramped the growth rate of.
Not everyone is doing that we just providing both ways for people to look at it.
Chip: Top golf.
Chip: <unk>.
Chip: Strength in that overall organization, we believe.
But.
I understand your point.
Chip: And they are demonstrating some of the results there and we're really now moving into the more.
The next question is from Noah <unk> with Keybanc capital markets. Please go ahead.
<unk>.
Hi, Thanks for taking my question, maybe just a follow up on the revenue synergies.
Chip: Exciting stages from our brand.
Chip: A digital and a revenue perspective.
Just just in terms of quantifying the.
Chip: So we're well ahead of where we expected to deliver in terms of the operational efficiencies the cost of capital if you would.
Revenue and adjusted EBITDA synergies related to those how should we think about what's kind of behind us in terms of.
Then what's what's ahead of us still and then Relatedly.
Chip: Growth rates that we're delivering.
Chip:
Just how should we think about the model.
Chip: Sourcing synergies all of those have been.
Opportunity related to the CDP.
Chip: Our realized as per our expectation and as shown in the deck and now we're getting our arms around these digital synergies.
In trial in the second half of 'twenty four.
Yes.
Sure.
Whats behind Us is clearly.
Chip: Brand synergies et cetera that we think can drive some significant market share in.
Those synergies that come from cost and.
Although that will continue right, where all of these investments that we're making both at corporate and at top golf.
Chip: Revenue growth and brand strength over the coming years.
Speaker Change: Got it thank you and then maybe Brian.
Provide synergy when you hear us talking about adding investments in cyber security and.
Speaker Change: Slide 24 that you have in the deck today.
Brian: You show the change in leverage ratio. If you were to consider that then your financing.
Workday other big infrastructure projects.
Brian: Rent versus.
Brian: Let's now largely considered interest expense would you consider changing the way you report a two turn difference in.
Allocate those into the corporate side of the business, but those are spread across the entire business and.
In essence a synergy.
Brian: Leverage ratio its pretty significant at this point.
Our ability to fund the venues to be able to use term debt effectively to have a lower cost on term debt.
Brian: And just move that the.
Brian: The interest expense, but then you're financing interest expense considered rent at this point.
Brian: There is obviously no principal due on any of that.
Gets extended across the business as a clear synergy that's already in place we've scaled the.
Brian: Landlord financings.
It looks like the market's penalizing you for some of the leverage on the balance sheet would you consider any changes to.
Growth of the top golf business and funded initiatives.
Brian: How does the street in your reporting.
Speaker Change: We agree with you we think that is a better way to look at it since there is no bullet or payment at the end and Thats why we tend to focus more on that.
That are clearly bearing fruit.
The revenue and brand synergies were not fully quantifying those yet, but we think theyre going to be significant we talked very clearly about the reach here right.
Speaker Change: Not everyone is doing that we just providing both ways for people to look at it.
But.
His top golf is Scott.
Speaker Change: I understand your point.
Speaker Change: The next question is from Noah <unk> with Keybanc capital markets. Please go ahead.
More than half of all golfers in the U S. We will visit top golf.
It is the largest source of new golfers going forward and is continuing to scale is larger than off then on course golf.
Noah: Hi, Thanks for taking my question, maybe just a follow up on the revenue synergies.
Noah: Just just in terms of quantifying.
And we obviously have an advantage and reach.
Noah: The revenue and adjusted EBITDA synergies related to those how should we think about what's kind of behind us in terms of.
There is it can be very significant going forward. The consumer data platform is going to be very significant for us across our all of our businesses.
Noah: Then what's what's ahead of us still and then Relatedly.
Noah: Just how should we think about the magnitude of the opportunity related to the CDP.
We've been investing in that across the business over the last year plus.
Noah: In Charlotte in the second half of 'twenty four.
We're going to be having that up and running by the end of the year.
Noah: Yes.
Noah: Sure.
Noah: Whats behind Us is clearly.
And it is potentially significant increasingly significant.
Noah: The synergies that come from cost and.
Starting towards the end of this year and going into next year. So stay tuned on that but it is a.
Noah: Yeah.
Noah: Although that will continue right, where all of these investments that we're making both at corporate and at top golf.
A big and important new project.
Noah: Provide synergy when you hear us talking about adding investments in cyber security and.
How you market to consumers and how you approach consumers and how you engage with consumers.
Noah: Workday other big infrastructure projects.
In today's day and world and increasingly in the future is going to be digital.
Noah: They allocate those into the corporate side of the business, but those are spread across the entire business and.
We are going to have a reach advantage in that and some capabilities that others will not have.
Noah: In essence a synergy.
Thank you.
Noah: Our ability to fund the venues to be able to use the term debt effectively to have a lower cost on term debt.
This concludes our question and answer session I would like to turn the conference back over to chip Brewer for any closing remarks.
I want to thank everybody for tuning in today, yes, I apologize that we went a little long.
Noah: Gets extended across the business as a clear synergy that's already in place we've scaled the.
We had a lot of material to cover as you can tell and we're <unk>.
Noah: Growth of the top golf business and funded initiatives.
Really trying to a best in class in terms of our transparency and.
Noah: That are clearly bearing fruit.
Noah: The revenue and brand synergies were not fully quantifying those yet, but we think they are going to be significant we talked very clearly about the reach here right.
Data that we present to you.
We feel very confident in our venue business, we feel very confident in our golf equipment business.
Noah: His top golf is got.
New business is clearly a long duration and appreciating asset.
Noah: More than half of all golfers in the U S. We will visit top golf.
And we've presented a lot of data that is new and in support of that so and invite you to take a while.
Noah: It is the largest source of new golfers going forward and is continuing to scale is larger than off then on course golf.
A look at that in due course.
Thank you for your time, and we look forward to talking to you at the end of Q1.
Noah: And we obviously have an advantage and reach.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Noah: There is it can be very significant going forward. The consumer data platform is going to be very significant for us across our all of our businesses.
Noah: We've been investing in that across the business over the last year plus.
Noah: We're going to be having that up and running by the end of the year.
Noah: And it is potentially significant increasingly significant.
Starting towards the end of this year and going into next year. So stay tuned on that but it is a.
Noah: A big and important new project.
Noah: How you market to consumers and how you approach consumers and how you engage with consumers in.
Noah: In today's day and world and increasingly in the future is going to be digital.
Noah: We are going to have a reach advantage in that and some capabilities that others will not have.
Speaker Change: Thank you.
This concludes our question and answer session I would like to turn the conference back over to chip Brewer for any closing remarks.
Chip Brewer: I wanted to thank everybody for tuning in today I apologize that we went a little long.
Chip Brewer: We had a lot of material to cover as you can tell and we're <unk>.
Chip Brewer: Really trying to a best in class in terms of our transparency and.
Chip Brewer: Data that we present to you.
Chip Brewer: We feel very confident in our venue business, we feel very confident in our golf equipment business.
Chip Brewer: New business is clearly a long duration.
Chip Brewer: And appreciating asset.
Chip Brewer: And we've presented a lot of data that is new and in support of that so I invite you to take a while.
Chip Brewer: A look at that in due course.
Speaker Change: Thank you for your time, and we look forward to talking to you at the end of Q1.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [music].
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Speaker Change: Good afternoon, and welcome to the top golf Callaway brands Q4, and full year 2023 earnings conference call.
Speaker Change: All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.
Draw. Your question. Please press Star then two.
Speaker Change: Please note this event is being recorded.
Speaker Change: I'd now like to turn the conference over to Katina Mitsotakis, Vice President of Investor Relations and corporate Communications. Please go ahead.
Speaker Change: Thank you operator, and good afternoon, everyone welcome to top golf Callaway brands fourth quarter and full year 2023 earnings conference call I'm Katina Mitsotakis, the company's Vice President of Investor Relations and corporate Communications joining me as speakers on today's call are chip Brewer, our president and Chief Executive Officer, and Brian Lynch, Our chief.
Brian P. Lynch: Financial Officer, and Chief legal Officer.
Brian P. Lynch: Earlier today, the company issued a press release announcing its fourth quarter and full year 2023 financial results. We've also published an updated presentation with supplemental information that we suggest you follow during todays call if necessary, we will extend todays call to give ample time for a question and answer session. Our earnings presentation as well as the earnings.
Brian P. Lynch: Press release are both available on the company's Investor Relations website under the financial results tab most of the financial numbers reported and discussed on today's call are based on U S. Generally accepted accounting principles.
In the instances, where we report non-GAAP measures, we identify the non-GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with regulation G. Please note that this call will include forward looking statements and 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 and the press release for a more complete description and with that I'd now like to turn the call over to chip for thank you Katrina good.
Chip Brewer: Good afternoon, and thank you for joining our call today everybody.
Chip Brewer: Starting on slide three we ended 2023 on a positive note, beating our Q4 expectations for both revenue and EBITDA.
Chip Brewer: This was driven by continued strength in both our golf equipment business and the Travis Matthew.
Chip Brewer: As well as better than expected performance at top golf, where same venue sales outperformed on strong holiday results and where we continue to drive improvements in venue level profitability.
Chip Brewer: Looking across our businesses for the full year golf equipment delivered excellent brand performance, maintaining its leadership positions in golf club market shares.
Chip Brewer: And in the overall technology and innovation ranking.
Chip Brewer: Our active lifestyle segment delivered solid growth in revenue and profitability driven by continued momentum at Travis Matthew.
Chip Brewer: And then top golf the team delivered 1% same venue sales growth for the full year on top of 7% growth in 2022.
As well as an impressive 100 basis points of venue level adjusted EBITDA margin expansion.
They also added 12, new venues with 11, new builds and one purchased via the big shots acquisition.
Chip Brewer: 2023 also marked an important financial inflection point for our company that being our transition to positive free cash flow.
Chip Brewer: Our results showed a $160 million of free cash flow at the consolidated level and $49 million at the top golf level.
Chip Brewer: As you know given the variable timing of reimbursements, we believe the most appropriate cash flow metric is embedded cash flow, which is free cash flow, excluding new venue and store growth capex.
Chip Brewer: Using this metric, we delivered $221 million and $94 million at the total company and top golf levels.
Chip Brewer: These numbers reflect positive trends in our fundamentals.
Chip Brewer: Looking forward, we expect our cash flow will stay meaningfully positive from here and that are embedded cash flow will increase slightly this year.
Chip Brewer: We anticipate our EBITDA cash flow and EPS growth were all ramped significantly in 2025 through 2028.
Chip Brewer: Due to the leveling off of corporate investments.
Chip Brewer: Tipping point of economies of scale across our businesses and lower overall corporate interest expense as our positive cash flow allows us to pay down debt over time.
Chip Brewer: In support of this we are providing illustrative 2026 through 2028 numbers in our earnings deck.
Chip Brewer: These are exhibits 21 and 23.
Chip Brewer: As I'm sure you can tell I remain convinced and excited about the long term earnings power of this business. We have demonstrated the strength of our golf equipment business over a long period of time. The Callaway brand is strong and we are set up for an excellent 2024 with an outstanding new product range.
Chip Brewer: Our active lifestyle segment has grown rapidly in both revenue and profits.
Chip Brewer: And although the top golf business has experienced some post COVID-19 same venue sales volatility when you look past that you see a business that is clearly strengthening and proving itself is a unique and appreciating asset with strong returns.
Chip Brewer: Top golfs track record for selecting an opening venues is extraordinary.
Chip Brewer: All do well and average opening results have exceeded our targets.
This is a skill set that has been built up over years and relies on multiple teams and functions across our organization.
Chip Brewer: It makes us unique.
Chip Brewer: Others have tried but as of yet no one has been able to replicate our model.
Chip Brewer: And it supports our strong confidence in our capital allocation strategy.
Chip Brewer: In addition, our venues are increasingly profitable over time with what we believe is a clear path to further upside.
Chip Brewer: I'll, even add we have now shown we can do this in the face of same venue sales volatility.
Chip Brewer: In short the.
Chip Brewer: The venues are achieving the return targets we communicated.
Chip Brewer: And our long durable and appreciating assets.
Chip Brewer: To help demonstrate these points we have included updated cohort and historical historical data and our earnings presentation. These are slides 16 through 18.
Chip Brewer: They show increasing average venue sales over time and increasing EBITDAR.
Chip Brewer: There is volatility over short periods of time, but over the longer periods the trends are clear.
Chip Brewer: As for the durability of the assets. The UK venues are now approaching 20 years old.
Chip Brewer: And still continue to grow both sales and profitability.
Speaker Change: Before speaking about where we're going this year I'd like to put our longer term opportunity into context by highlighting the underlying strength of the sport of golf and how the modern golf ecosystem is evolving.
Speaker Change: As shown on slide four per the National Golf Foundation. There are now a total of $45 million on and off course golfers.
Speaker Change: Up 9% year over year and up 32% since 2019.
Speaker Change: Within this.
An estimated 26 6 million Americans played golf on course in 2023.
Speaker Change: $1 million year over year, and what was the largest one year growth in participants since 2001.
Speaker Change: Driven by an all time high of first time on course golfers of $3 4 million.
Speaker Change: I believe it is both impressive and instructive that this far past Covid on course golf is still seeing this kind of momentum.
Speaker Change: At the same time, $32 9 million Americans participated and off course golf.
Speaker Change: Up 18% year over year and up 41% since 2019.
Speaker Change: The game of golf at large is clearly benefiting from a large influx of participants.
Speaker Change: Capital the benefit of more flexible work environments.
Speaker Change: Positive change in perception of the game, especially with teens and young adults.
Speaker Change: And the structural growth of off course golf.
Speaker Change: Within this context.
Speaker Change: Top golf alone is adding three to 4 million new unique visitors each year.
Speaker Change: We will have over 30 million unique visitors in 2024 thus.
Speaker Change: Thus, making it a major force in overall golf with a larger individual participation than total on course golf.
Speaker Change: In response to those that May question, if off course golf will drive on course.
Speaker Change: We now know that around two thirds of today's on course beginners are coming to the course with off course experience.
Speaker Change: Compared to less than 40% five years ago and already 10% of today's total encores players credit top golf for getting them to the golf course.
Speaker Change: Now turning to our 2020 for guidance.
Speaker Change: Proud to report that we are once again projecting growth in revenue EBITDA and embedded cash flow.
Speaker Change: We have also planned our business somewhat conservatively given the uncertain consumer environment.
Speaker Change: And we are continuing to invest in key corporate infrastructure and profitability initiatives.
Speaker Change: Both at the corporate level and at top golf.
Speaker Change: Like our venues we feel very good about the long term returns on these investments.
Speaker Change: And we believe we will show leverage on them relatively quickly.
Speaker Change: Most likely by 2025.
Speaker Change: Lastly, we have specific projects some of which I will share with you today and with more to come throughout the year. We are also now entering the stage, where we will be unlocking more of the exciting revenue brand and digital synergies that our structure uniquely allow.
Speaker Change: Now I'd like to walk you through our business segment performance.
Speaker Change: At our top golf venue business.
Speaker Change: During the quarter and for the full year, we made progress on our three key performance drivers.
Speaker Change: Starting with venue unit growth we.
Speaker Change: We successfully and strongly opened eight venues in Q4 for a total of 11 new venues in 2023.
Speaker Change: Our new venues continue to perform extremely well, we all sat added one venue via acquisition in 2023.
Speaker Change: And in early January of this year, we purchased one additional venue from big shots in Bryan, Texas adjacent to Texas, A&M University for approximately $7 million.
Speaker Change: As of this call.
Speaker Change: We now own and operate 94 venues and have five top golf franchise locations and three big shot franchisee locations.
Speaker Change: We expect to add another seven new top golf venues. This year two in the first half and five in the second half for a total of eight new venues in 2024.
Speaker Change: We also expect to help opened two international franchisee locations.
For 2025, we are expecting to return to opening 10 to 11 new owned venues.
Speaker Change: Moving onto same venue sales performance in Q4, our same venue sales declined 3%.
Speaker Change: Which was meaningfully ahead of our expectations driven by stronger than expected results in our wanted to bay consumer oriented business.
Speaker Change: Particularly at the end of December.
Speaker Change: For the quarter or 1% to two bay St venue sales was flat just as it was in Q3.
Speaker Change: Our three plus Bay, primarily corporate business continued to stabilize during the quarter and had its second consecutive quarter of relative improvement.
Speaker Change: As a reminder, corporate is usually approximately 30% of sales in Q4 and 20% for the full year.
Speaker Change: Our December results were undoubtedly helped by weather as we had challenging weather in December 2022, but seasonally very mild weather in December 2023.
Speaker Change: Having discussed the quarter I am pleased to report the full year same venue sales ended in positive territory up 1%.
Speaker Change: This is a notable achievement, particularly when you consider the strength of our 2022 same venue sales growth.
Speaker Change: And the strong two year stacks as shown in exhibit nine.
Speaker Change: Our one to two bay business, which is primarily consumer and comprises 80% of our annual venue revenues was up 4% for the full year.
And when you consider our comp sales versus pre COVID-19 levels are.
Speaker Change: Our one in two bay consumer business is up 11% versus 2019.
Speaker Change: While the three plus day corporate business is up 1%.
Speaker Change: Looking ahead, our 2024 guidance recognizes a tough comp in Q1.
Speaker Change: Some poor weather to start the year in January.
With this we are expecting Q1 same menu sales to be down potentially high single digits.
Speaker Change: After Q1, we see somewhat easier comps and are forecasting approximately flat same venue sales for the full year.
Speaker Change: As we've previously discussed our two points of weakness on the same venue sales during the second half of 2023.
Speaker Change: Midweek traffic and events.
Speaker Change: To help address the midweek opportunity we're in process of implementing weekday promotions.
Speaker Change: Primarily half off game play Monday through Wednesday via the App.
Speaker Change: Our test markets indicate this new mid week promotion will help keep us competitive with other entertainment and leisure options.
Speaker Change: We'll be net profitable.
Speaker Change: And will also help drive our digital business, which will in turn provide a long term benefit.
Speaker Change: We do not believe there will be a major driver of sales growth.
Speaker Change: But they will help and appear to be an appropriate response that balances short and long term needs.
Speaker Change: To help further stabilize events, we're improving our programs and value adds for both smaller events such as team buildings or birthday parties.
Speaker Change: As well as larger corporate bookings.
Speaker Change: Looking further down field, we are developing additional consumer offerings not necessarily value oriented.
Speaker Change: That we are going to be announcing in early Q2.
Speaker Change: We're also starting to really scale, our digital offerings, something I'll speak more about in a moment.
Speaker Change: We believe both of these initiatives will be appealing to consumers and could create upside.
Moving onto our third and final key performance driver of venue margin expansion.
Speaker Change: This is really the biggest highlight of 2023 for top golf.
Speaker Change: Top golf has experienced increase efficiencies driven by our Pi inventory management system.
Speaker Change: Along with a new labor model and Cogs initiatives that together are working beautifully.
Speaker Change: As a result, our 2023 venue level adjusted EBITDA margin increased approximately 100 basis points year over year to approximately 34%.
Speaker Change: And in Q4 alone we expanded EBITDAR by approximately 370 basis points, despite our highest margin business the events business being down during the quarter.
Speaker Change: Hopefully this provides confidence in our ability to continue to drive improvements in this important metric.
Speaker Change: 2023 was an important year for laying the technology foundation in our venues with the rollout of top tracer across all U S venues.
Speaker Change: Thus, allowing a common gaming platform.
Speaker Change: As well as the rollout of our Pi inventory management and booking system across all venues.
Speaker Change: These critical steps enable us to turn our efforts towards accelerating in venue digital capabilities, creating.
Creating new gaming innovation.
As well as bringing cross brand synergies to life in 2024 and beyond.
Speaker Change: To this end, we've created a new commercial and digital team within top golf.
Dedicated to optimizing revenue management and driving our digital business.
Speaker Change: Examples of what the top golf digital team is working on are shown on slide 13.
Speaker Change: And I encourage you to review it. So you have the appropriate feel for the impact these initiatives will have on our business.
Speaker Change: One specific project that I'll mention is our company wide consumer data platform.
Which is now expected to be up and running by the second half of this year.
Speaker Change: This important project will unlock digital synergies across the brands and is expected to be a significant catalyst for future growth opportunities across our brand portfolio.
Speaker Change: Speaking of cross brand synergies there is a lot to be excited about in the coming weeks as shown on slide 14.
Speaker Change: Starting just last week, all top golf players will have the opportunity to upgrade the callaway branded premium clubs at all venues.
Speaker Change: By mid year. This will include clubs specifically designed by Callaway for use in Bay.
Speaker Change: By both established golfers and those new to the game.
Speaker Change: In the near future, we will be able to up sell this program via the App and in reservations.
Speaker Change: All top golf golf professionals are on Callaway golf staff.
Speaker Change: And can now exclusively sell Callaway golf equipment to their students.
Callaway will be hosting organized club fitting events at all venues beginning with the first major of 2024.
Speaker Change: And we will also be the official equipment sponsor of top Golfs League nights.
Speaker Change: In addition, our respective marketing teams are leaning into our Callaway Chrome tour golf ball launch to promote sales and trial of our new golf ball.
Speaker Change: Our goal is 200000, new users coming specifically from top golf.
Speaker Change: We also plan to show various Callaway branded limited edition golf balls in venues throughout the year.
Speaker Change: We have an exciting callaway in top golf Golf club program that will run across all venues.
And Travis Matthew will increase its presence in approximately one third of the venues where the price point works effectively.
And later in the year, we'll be implementing a new callaway digital kiosk in the lobby of all venues.
Speaker Change: That we hope will amaze and delight, all the new and existing golfers that visit the venues during the year.
Speaker Change: Also towards the end of this year or early next we will be introducing specific callaway branded golf equipment designed for the beginner golfers.
Speaker Change: <unk> introduced to the sport via top golf.
Speaker Change: We will then leverage the consumer data platform and our digital teams to market. This product to these new players, thus, creating a competitive advantage and reach to what should be the largest single source of new golfers in the modern golf ecosystem.
Speaker Change: We expect over 30 million unique players will walk into top golf venues in 2024.
Speaker Change: With a strong in venue Callaway brand presence the ability to trial Callaway premium equipment in our base.
Speaker Change: And an advantage in digital reach as well, we're excited about brand Callaway being front and center with this next generation of modern golfers.
Speaker Change: At the same time, Callaway and Travis Matthew will be working to drive awareness and business the top golf.
Speaker Change: All of this is in addition to the synergies we've already been enjoying such as a lower cost of capital and faster venue expansion at top golf.
Speaker Change: Shared corporate services top tracers sales synergies.
Speaker Change: Tore exposure as well as other key partnerships across the brands and operational support including distribution and sourcing.
Speaker Change: Our 2024 forecast for top golf is specifically called out in our guidance section so I won't speak to it directly here I'll.
Speaker Change: I'll add that we expect top golf to be free cash flow positive on its own right.
Speaker Change: And we're delighted with the direction of the business.
Speaker Change: Moving to golf equipment.
The business performed exceptionally well from a brand perspective in 2023.
Our U S dollar market share placed us as the number of club brand and the number two golf ball brand.
Speaker Change: In clubs alone we were the number one in total clubs drivers fairway woods hybrids and irons.
Speaker Change: This was led by our 2023 launch of paradigm.
Speaker Change: In Q4, we had a highly successful launch of our new AI one putter line.
Speaker Change: Global revenues were up 5% in Q4, and approximately flat on a full year currency neutral basis.
Speaker Change: Despite an approximately 100 million dollar headwind related to 2020 twos retail inventory catch up.
Speaker Change: Golf demand remained robust through 2023 rounds played grew 4% year over year and 2023 marks the fourth year in a row, where rounds played have exceeded $500 million.
Speaker Change: And I've already discussed with you the strength in participation, including new entrants.
Speaker Change: In early January we announced some very exciting new launches in both clubs and golf ball.
Speaker Change: In clubs, our new family of AI smoke drivers very woods and irons.
Speaker Change: Truly embody calloway's leadership in R&D.
Speaker Change: These clubs feature in AI, smart face, which optimizes performance using swing dynamics from thousands of golfers.
Speaker Change: And micro deflections across the face.
Our marketing people say, it's best.
Speaker Change: It's sweeter from every spot.
Speaker Change: Both longer and more forgiving.
On the ball side, we recently launched our new line of Chrome Tour Chrome tour X and chrome soft golf balls.
Speaker Change: Which reflect the culmination of many years of R&D work as.
Speaker Change: As well as the extensive upgrade of our Chicopee ball manufacturing facility.
Speaker Change: We are effectively launching a new brand in chrome tour.
Speaker Change: A brand that will complement our existing strength and chrome soft and super soft.
Speaker Change: This is a big launch for us and something we don't take lightly we.
Speaker Change: We deferred doing it previously instead waiting until we further proved out our design thesis and manufacturing capabilities.
Speaker Change: We are proud of our record in golf ball and both our sales and market share record over the last eight years supports this.
Speaker Change: Still we believe we have more potential we believe we make the best performing and most consistent ball in golf and.
Speaker Change: And we now feel ready to tell the world about it.
Speaker Change: As we forecast the golf equipment segment for 2024, we're encouraged that field inventories are returned to more normalized and healthy levels with no abnormal items to lap this year.
And consumer interest in the game remains high.
Speaker Change: And we're excited about the potential opportunity for our business to outperform the market given the strength of our new launches.
Speaker Change: As a result, we expect both revenues and profits to be up in this segment.
Speaker Change: Switching gears to our third and final segment, our active lifestyle Division grew 9% in 2023 and continue to expand margins.
Speaker Change: Topline growth was driven by continued brand momentum at Travis Matthew.
Speaker Change: Which had a strong year from both a top and bottom line perspective.
In 2023, Travis Matthew grew in all channels, including adding six new stores and launching into the women's category.
Speaker Change: In 2024, they plan to open eight to 10 new stores.
Slowly expand our international footprint as well as amplify the fantastic women's product with marketing and stronger in store exposure.
Speaker Change: The women's product is resonating nicely.
Speaker Change: And although it is still small from a percentage.
<unk>, we're optimistic on its long term potential.
Speaker Change: Also of Travis Matthew in 2023, we had an approximately $35 million inventory fill in and in our corporate channel that will not repeat in 2024.
Speaker Change: This will cause some year over year comparison issues for 2024 versus 2023.
Speaker Change: Excluding this we continue to expect strong revenue growth at Travis Matthew both this year and going forward.
Speaker Change: Jack will skin margins were challenged in Q4 due to continued softness in Europe, driven by continued high field inventories and despite strong performance in China, both in Q4 and for the full year.
Speaker Change: That said the Jack <unk> business grew slightly on the top line.
Speaker Change: And was approximately breakeven EBITDA in 2023 overall.
Speaker Change: We now have new leadership in place in Europe, and we're optimistic for stabilization followed by growth during the balance of 2024 and into 2025.
Speaker Change: Overall for 2024, we're expecting approximately flat revenues with operating income slightly down in this segment.
Speaker Change: In.
Speaker Change: <unk> two.
Speaker Change: <unk> 2023 ended on a strong note.
Speaker Change: In 2024 has begun with exciting new products and programs across our brands.
Speaker Change: We remain confident in our strategic initiatives and our ability to grow our cash flows from here.
The growth is forecast to be modest for 2024 as we both continue to invest in the business.
Speaker Change: And we are also planning cautiously.
Speaker Change: Cash flow EBITDA, and EPS, then ramp nicely as our cash flow compounds and as we leverage our scale.
Speaker Change: Thank you for your time today and Brian over to you.
Brian P. Lynch: Thank you chip and good afternoon, everyone.
Brian P. Lynch: As chip mentioned, we are pleased with how we finished 2023.
Brian P. Lynch: We had fourth quarter revenue growth across each of our operating segments.
Brian P. Lynch: Golf opened eight new venues in the fourth quarter alone and finished the year with same venue sales growth of plus 1%, while also increasing venue level adjusted EBITDAR margins by approximately 100 basis points year over year.
Brian P. Lynch: Our golf equipment business finished the year with the number one U S golf equipment market share for golf clubs and number two in golf balls.
Brian P. Lynch: We also achieved positive free cash flow for the year, both on a consolidated basis and at top graph.
Those were important financial milestones for us and we achieve them well ahead of our plan that we set at the time of the merger.
Brian P. Lynch: We remain in a strong financial position, our cash and cash equivalents increased $213 million to $394 million at December 31, 2023 compared to the prior year, which is after taking to account over $50 million in common stock purchases, including $12 million in the fourth quarter.
Brian P. Lynch: And deploying approximately $30 million for the big shots acquisition.
Brian P. Lynch: Our available liquidity, which is comprised of cash on hand, and availability under our credit facilities increased $327 million to $743 million due to proceeds from the company's new term loan and better than expected cash flows this year.
Given the strength of our businesses and our solid financial position. We believe we are well positioned entering 2024, and we expect the growth revenue adjusted EBITDA and embedded cash flow again this year.
Brian P. Lynch: Now turning to our fourth quarter results.
We grew consolidated revenues, 5% year over year to $897 million.
Brian P. Lynch: Driven by growth across all three operating segments led by top golf venues, which were up 9% and golf clubs, which were up 17%.
Brian P. Lynch: Given the seasonality of our businesses, we typically report an operating loss in the fourth quarter and.
In the fourth quarter of 2023, our non-GAAP operating loss improved 74% to a loss of $6 6 million.
This improvement was driven by a significant improvement in segment operating income in the top golf and active lifestyle segments.
Brian P. Lynch: non-GAAP fourth quarter net loss increased approximately 5.4.
Brian P. Lynch: $4 million compared to last year.
Largely due to the increased D&A and interest expense related to new venue development.
Brian P. Lynch: Adjusted EBITDA of $69 $8 million increased 91% compared to last year and exceeded the high end of our guidance range by approximately $12 million due primarily to better than expected revenue and venue margins at top golf.
Brian P. Lynch: Moving to segment performance at top golf Q4 revenue grew 7% driven primarily by new venues, partially offset by better than expected same venue sales of minus 3%.
Brian P. Lynch: The beat in Q4 same venue sales was driven by better than expected traffic in our one and two bay consumer business, which benefited from a strong holiday season and year over year favorable weather in December.
Brian P. Lynch: <unk> operating income increased to $23 million in the fourth quarter compared to $3 million in the prior year and adjusted EBITDA increased $30 million to $73 million.
Brian P. Lynch: These improvements were driven primarily by the increased revenue as well as continue operational efficiency gains in the venues.
Brian P. Lynch: The operational gains included improved labor management, the impact of Pi being rolled out in all venues and lower food and beverage costs due to tough comps increased scale.
Brian P. Lynch: Yeah.
Brian P. Lynch: Moving to Q4 results for golf equipment.
Brian P. Lynch: Revenue increased 5% to $199 million.
Brian P. Lynch: Primarily due to unexpected shift in golf club launches.
Brian P. Lynch: Partially offset by a decline in golf ball sales as we prepared for the 2024 launch of our new Chrome tour ball, which launched on February 2nd.
Brian P. Lynch: <unk> equipment operating income decreased $21 million due to the expected lower production volumes in the second half of 2023 as compared to the prior year, resulting in unfavorable cost absorption as well as a return to normal promotional levels as we mentioned last quarter.
Brian P. Lynch: And our active lifestyle segment Q4 revenue grew 3% primarily due to increased apparel sales, which was led by Travis Matthew.
Brian P. Lynch: Operating income increased to $20 million compared to breakeven in the prior year.
Brian P. Lynch: This increase was driven by increased revenue and margin as a result of a higher mix of margin accretive direct to consumer sales as well as tailwind from lower input costs year over year.
Brian P. Lynch: Moving to balance sheet and liquidity highlights as I mentioned earlier at December 31, 2023, our available liquidity increased $327 million to $743 million compared to the prior year due to proceeds from the company's new term loan and better than expected cash flow.
Brian P. Lynch: This year.
Brian P. Lynch: At year end, we had a total net debt of $2 2 billion.
Brian P. Lynch: Which excludes convertible debt of approximately $258 million compared.
Compared to $1 9 billion at the end of 2022.
This increase relates primarily to incremental new venue financing and the additional $300 million of.
Brian P. Lynch: Term loan debt.
Brian P. Lynch: As a reminder, we think it is also helpful to evaluate our net leverage position.
Brian P. Lynch: Excluding the venue financing REIT debt, which is essentially capitalized rent with no additional principal or bullet repayment required.
Brian P. Lynch: Including the REIT that a REIT adjusted net debt is $971 million.
Brian P. Lynch: At the end of 2023 compared to $997 million at the end of 2022.
Brian P. Lynch: Our net debt leverage which excludes convertible debt with three eight times at December 31, 2023, compared to three four times a year.
Brian P. Lynch: Year end 2022.
Brian P. Lynch: This change was driven by the opening of additional venues in Q4 2023 versus the prior year.
Brian P. Lynch: <unk> adjusted net debt leverage ratio was one nine times compared to two point.
Brian P. Lynch: Zero times in the prior year we.
Brian P. Lynch: We feel comfortable with these leverage levels.
Brian P. Lynch: Our inventory balance decreased to $165 million or 17% from $959 million at year end.
Brian P. Lynch: $22 million to $794 million at the end of 2023.
Brian P. Lynch: A significant achievement by our teams who actually manage this inventory reduction in light of the post COVID-19 surge in 2022.
Brian P. Lynch: We continue to expect our active lifestyle image inventory to decrease in 2024 is our apparel business is normalized their inventory.
Brian P. Lynch: We feel good about the quality of our inventory.
Brian P. Lynch: Capital.
Brian P. Lynch: <unk> for the 12 months ended December 31, 2023 were $482 million and we received reimbursements of $277 million from a REIT arrangements for net capital expenditures of $205 million.
Brian P. Lynch: Of which a $146 million is related to top golf.
Brian P. Lynch: Net capex was approximately $30 million lower than our $240 million guidance due to the timing of reimbursements.
Brian P. Lynch: Consolidated free cash flow and embedded cash flow were $160 million and $221 million respectively. Both ahead of expectations.
Brian P. Lynch: As a reminder, embedded cash flow was free cash flow minus growth capex for new venues and retail stores.
Brian P. Lynch: This metric provides a good view of the cash generation power of our business as it stands today and it eliminates the noise from the timing of reimbursement.
Brian P. Lynch: Looking ahead, we believe we will grow embedded cash flow in 2024.
Brian P. Lynch: In light of FX headwinds and continued corporate infrastructure investments. This year the growth in embedded cash flow is expected to be modest in 2024, but ramp in 2025 through 2028.
Brian P. Lynch: We also expect to remain free cash flow positive both in our consolidated business as well as top golf.
Brian P. Lynch: Given our better than expected cash generation in 2023, and assuming we are on plan for 2024, we would expect to begin paying down our term loan debt later in 2024.
I would now like to provide an update on our outlook for 2024.
Our outlook reflects both our confidence in our business as well so potentially softer consumer environment in 2024.
Brian P. Lynch: All in all we expect revenue EBITDA and embedded cash flow growth in 2024.
Brian P. Lynch: As I mentioned last quarter, we are in phase two of our top golf journey.
In phase one we funded top golfs operations and venue development.
Brian P. Lynch: This phase was very successful as we increase the pace of new venue development and at the same time improve venue profitability, resulting in significant revenue and adjusted EBITDA growth.
Brian P. Lynch: As expected. However, this accelerated development had a negative impact on earnings per share due to the increased interest expense and D&A associated with that development.
Brian P. Lynch: <unk> is now free cash flow positive and self funding with a developer led financing and we have moved to phase III.
Brian P. Lynch: The phase II, which will we will be in through 2024, we expect to scale our business further grow embedded cash flows stabilize EPS.
Brian P. Lynch: We also expect to be at the tail end of our post merger investments in corporate infrastructure.
Brian P. Lynch: In 2025 through 2028, we expect to be in phase three of our top golf journey, where we will have further growth in our cash flows begin to meaningfully exceed our capital requirements.
Brian P. Lynch: As a result of the increased scale leveling of corporate investments and the impact of the cash flow generation on the interest expense, we would expect EPS to begin to grow in 2025 and ramp from there.
Brian P. Lynch: Before moving to specific 2024 guidance I want to highlight why we have so much confidence in the long term performance of this business.
Brian P. Lynch: I refer you to slide 18, which depicts 2023 adjusted EBITDAR margin by venue cohort.
Brian P. Lynch: As you know our venues to open well and quickly ramp to attractive revenue margin and profit generation.
Brian P. Lynch: This is consistently true in an attractive element of the top golf business.
Brian P. Lynch: As shown on slide 18, you can see that the venue adjusted EBITDAR margin not only doesn't decrease with age of the venue, but if anything it actually increases with age.
Brian P. Lynch: And this effect is even more pronounced when looking at venue pretax income due to the DNA being somewhat frontloaded in the first five years.
Brian P. Lynch: Overall, it is clear the top golf venues opened with strong economics that improve over time and the venues are appreciating assets over the long term.
Brian P. Lynch: At present, approximately half of our venues opened in the last five years.
Brian P. Lynch: Accordingly, we expect the profit contribution from our venues to expand over time.
Speaker Change: With that said, let's turn to 2020 for guidance.
Speaker Change: Looking at our 2024 guide Holistically.
Speaker Change: Chip mentioned, we view 2024, as an investment year in which we are focused on driving the digital transformation of Dot Gov.
Speaker Change: And separately, largely finishing necessary post merger investments in corporate infrastructure, including information technology systems and cyber security.
Speaker Change: Now, let's look at more specific guidance for 2024.
Speaker Change: There will be a few headwinds as we enter 2024. In addition to the investments I just mentioned.
Speaker Change: First there is a revenue headwind in the active lifestyle business chip called out earlier.
The second is related to foreign currency.
Speaker Change: In addition to unfavorable translation based on recent rates. There are also foreign currency hedging gains in 2023 of approximately $13 4 million that will not repeat in 2024.
Overall, we estimate these foreign currency changes will negatively impact revenue by approximately $10 million and adjusted EBITDA by approximately $20 million.
Speaker Change: Lastly, the top golf business will be lapping a 11% growth in same venue sales in Q1, 2023, which was partially due to a post COVID-19 surge in our events business, which was resulting in a same venue sales estimates are down high single digits in Q1 and flat for the full year.
Speaker Change: Both as compared to 2023.
Speaker Change: For 2024, we anticipate consolidated net revenue growth of approximately 6% versus the prior year to $4 $5 five to $4 $5 $5 5 billion.
Speaker Change: Consolidated revenue growth is expected to be driven by low single digit growth in the golf equipment segment.
Speaker Change: And growth of approximately 11% at top golf.
Speaker Change: The top golf growth is primarily due to new venue growth.
Speaker Change: Moving to 2020 for adjusted EBITDA, we're guiding to a range of $620 million to $640 million, which would represent growth of 4% to 7% approximately commensurate with the projected revenue growth.
Speaker Change: As mentioned earlier, we would expect to begin to see leverage in 2025, we are projecting top golf adjusted EBITDA to be approximately $350 million or 17, 9% margin.
Speaker Change: It should be approximately 60 basis points of expansion on a year over year basis.
Speaker Change: We expect non-GAAP diluted EPS of <unk> 26 to <unk> 34.
Speaker Change: Compared to <unk> 49 this year.
Speaker Change: This decrease was primarily due to increased depreciation and amortization expense as well as increased venue financing interest due to additional venues.
We have included in the Investor deck today on slide 23, and estimated walk from EBITDA to EPS for 2024.
Speaker Change: Finally, we expect to spend approximately $475 million in gross capital expenditures in 2024 compared to $482 million in 2020.
Speaker Change: The decrease was due to less new venue development in 2024 compared to the prior year.
Speaker Change: We estimate reimbursements of $214 million in 2024.
Speaker Change: Compared to $277 million in 2023.
Speaker Change: Now turning to Q1, specifically.
Speaker Change: In Q1, we expect consolidated revenue of $1, one four to $1 6 billion.
Speaker Change: Flat to slightly down versus 2023.
Speaker Change: This decrease is largely related to the active lifestyle corporate channel headwinds chip mentioned.
Speaker Change: And top golfs expected decrease in Q1 <unk> sales.
Speaker Change: We also expect Q1, adjusted EBITDA of $130 million to $140 million compared to $157 million in the prior year.
Speaker Change: This decrease was primarily related to the flat to down revenue combined with projected unfavorable FX and the 2024 investments.
Speaker Change: These factors along with increased D&A and interest expense related to new venues will negatively impact first quarter, Etfs, which we estimate to be approximately breakeven to a slight loss compared to <unk> 17 last year.
Speaker Change: We have provided today in the investor presentation, a lot of new and more detailed information in response to investor inquiries.
Speaker Change: I Hope you find this information helpful.
Speaker Change: Overall, we're pleased with where we are as a business.
Speaker Change: Quite significant headwinds since the merger from unfavorable foreign currency and rising interest rates, we have achieved greater growth in cash flow than we expected at the time of the merger.
Speaker Change: We're also encouraged that we are at the tail end of our post merger investments and are beginning to capture the synergies with top golf as Jeff described.
Speaker Change: We are excited about the progress we have made since the merger in beginning in 2025, we expect to reach the scale and infrastructure necessary to begin ramping a better cash flow and earnings.
Speaker Change: We look forward to reporting to you on our progress.
Speaker Change: We will now open the call for questions operator over to you.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: Please limit yourselves to one question. If you have additional questions you may reenter the queue.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question is from Alex Perry with Bank of America. Please go ahead.
Alex Perry: Hi, Thanks for taking my question here.
Alex Perry: I guess I just wanted to ask what does the flat top golf competency you assume in terms of walk in versus corporate maybe just give us some help in terms of how youre thinking about those two pieces of the business.
Alex Perry: Would you expect the corporate events business to return positive following the <unk> against the easier comps and what are your sort of forward bookings, indicating it looks like that accelerated a bit in the fourth quarter is that a trend you expect to continue thank you.
Alex Perry: Sure Alex this is Jeff.
Alex Perry: So.
Alex Perry: For Q1, we're expecting a tough comp as.
Alex Perry: Yes.
Alex Perry: You would expect.
Alex Perry: Overall, but specifically in the corporate business.
Alex Perry: Corporate business was still at that post Covid surge point.
Alex Perry: In the first quarter last year, and then we saw the change in trend after that.
Alex Perry: After first quarter.
Alex Perry: We do expect corporate events to stabilize.
Alex Perry: <unk>.
Alex Perry: Yes.
Alex Perry: Already seeing that you can see that in the data right now the walk in business has been stable over the last several quarters.
And.
Alex Perry: We do expect that to.
Alex Perry: Improved through the year as well so we're seeing an improving trend we have easier comps after Q1.
Alex Perry: And.
Alex Perry: Pretty.
Alex Perry: Clear direction I think in terms of what we've seen in consistency with what we've seen over the last.
Alex Perry: Four or five months.
Speaker Change: Perfect. That's really helpful best of luck going forward.
Speaker Change: Thank you.
Speaker Change: The next question is from Megan Alexander with Morgan Stanley. Please go ahead.
Casey Alexander: Yeah. Thanks could you maybe just a follow up on that is there any way to quantify the weather impact to January and weather.
Casey Alexander: <unk> seen so many sales improved.
From that level.
Casey Alexander: Megan we saw headwinds from weather in January we saw tailwind from weather in December which is somewhat what you would expect this time of year some volatility around that.
Casey Alexander: In January the weather headwind was roughly about 200 250 basis points relative to the full quarter.
Casey Alexander: We don't read too much into that other than that's one of these things that happened.
At this time of year the trends that we were seeing in.
Casey Alexander: Really for the second half of last year.
Casey Alexander: Or indeed, the trends that are continuing and we feel good about the direction overall of our.
Casey Alexander: Same venue sales with some clear.
Casey Alexander: Opportunities that we've talked about what the midweek promotions in the digital efforts and other initiatives that we're developing that we think will have a positive impact on the Saint <unk> SaaS.
Speaker Change: Super helpful. I guess, maybe to that point on some of the midweek promotions Youre doing I think you ran some tests during the fourth quarter I guess, how do you make sure that you have been doing this on Tuesday, as well, but how do you make sure that it doesn't cannibalize some of the weekend traffic you're seeing.
Speaker Change: Well, we track that specifically and.
Speaker Change: That is indeed, the one thing that we were most guarded again so.
Speaker Change: Our results have indeed shown that it not only doesn't cannibalize the weekends.
Speaker Change: Additive from a traffic perspective, and therefore net profitable and we're obviously also relatively measured in the promotion that we're now implementing half off game play only through the App.
Speaker Change: Which is not too dissimilar from what we saw on the Tuesday.
Speaker Change: But we think that it will have a positive impact.
And we did indeed trial that before we implement it.
Speaker Change: The next question is from Randal <unk> with Jefferies. Please go ahead.
Hey, good evening everybody.
Randal: I guess, Brian maybe if you could give us some perspective on we know the comp guide for the first quarter. We know the comp guide for top golf, I'm, saying I'm talking about for the year around flat.
Randal: Can you give us a little perspective of how we should be thinking about that comp trajectory.
Randal: Throughout the year and then back on the mid week business for top golf versus the weekend business could you just give us some maybe frame it out a little bit on what's the difference.
Randal: Is the trend in midweek versus weekend are you still seeing a very stable solid business on the weekends and the midweek has just been the problem that should be solved in the next quarter or so just to give us a little flavor on how we should be thinking about the trajectory.
Top golf comps overall throughout the quarters, and then mid week versus weekend would be super helpful. Thanks, guys.
Randal: Hey, Randy it's chip I'm going to jump in on this one.
Chip Brewer: Then Brian if you have anything to add jump in.
We are still seeing strong results on the weekend. So the weekends are continuing to comp positive play for us as we mentioned last quarter. So.
Speaker Change: No change in trend on that.
Speaker Change: And through Q4, we continued to see a weaker overall.
Speaker Change: Our result in the consumer business mid week.
Speaker Change: So those are consistent and.
Speaker Change: Also a good news story, because we can be targeted about how we address that.
Speaker Change: Specifically with it only being a mid week issue on the consumer portion of our business.
Speaker Change: And then in terms of how it's going to.
Speaker Change: Or at least we're forecasting it to work through the full year in terms of the same venue sales.
The math works that we're projecting a high single digit down in.
Speaker Change: Q1, after a big comp gain a year ago in Q1.
Speaker Change: And then.
Speaker Change: For the balance of the year low to mid single digits positive to get us to that.
Speaker Change: Flat number for the full year.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Next question is from Daniel <unk> with Stephens, Inc. Please go ahead.
Yeah, Hey, good evening, everybody. Thanks for taking our question.
Daniel: To me ill get away from the trend here ask about the non top call part of the business trying to look through the guidance a little bit obviously, you talked about that a lot of exciting synergies and momentum, but if we strip out top golf EBITDA from total it looks like kind of remaining EBITDA will be down year over year in 'twenty four 'twenty three we had headwinds in the golf equipment.
Daniel: Lower production, but can you walk through the puts and takes.
Daniel: One of the core or the non top golf EBITDA will be lower year over year, Brian in the guidance.
Daniel: Brian why don't you take that one and then I'll jump in sure on the non comp.
Brian P. Lynch: Again, just want to remind you that FX was going to be a headwind next year, we've talked about $10 million revenue, but theres also.
Brian P. Lynch: Some hedge gains of about $13 million to $14 million or going going away.
Brian P. Lynch: And then there is a bunch of investments that we talked about during our script.
Brian P. Lynch: The corporate business as well.
Brian P. Lynch: So that's probably $30 million.
Brian P. Lynch: Headwind right there.
Brian P. Lynch: Sure.
Brian P. Lynch: Yes.
Brian P. Lynch: Okay.
Brian P. Lynch: And then Daniel we are seeing the golf equipment business, we are projecting that to be.
Brian P. Lynch: Up mid to high single digits.
Brian P. Lynch: This coming year.
Brian P. Lynch: The active lifestyle roughly flat.
Golf equipment business increasing profitability.
Brian P. Lynch: Active lifestyle.
Brian P. Lynch: Flat to slightly down.
Speaker Change: Helpful color I'll take the rest offline thanks guys.
Speaker Change: The next question is from Kate Mcshane with Goldman Sachs. Please go ahead.
Kate Mcshane: Hi, Thank you for taking our question.
Kate Mcshane: Just with regards to the new innovation AI smoke.
Kate Mcshane: How big of a launch of this relative to the paradigm with the chrome toward golf ball is there.
Kate Mcshane: A significant price differential between that.
Kate Mcshane: Price.
Speaker Change: Sure Kate.
Kate Mcshane: Let me start on golf Golf ball. If this is a bigger launch for us than we have had last year.
Kate Mcshane: It's our premium ball launch and in fact, it's basically a new brands that we're introducing to the market. So on the golf ball side.
Kate Mcshane: Our big launch big opportunity.
Kate Mcshane: Pricing.
Is up on this product versus where we were previous as well.
Kate Mcshane: And relative to average ball.
Kate Mcshane: The higher price point in fact this is matches.
Kate Mcshane: The price points of the most premium golf balls that have any market share in the in the market.
Kate Mcshane: In the club side of the game the AI smoke is a very significant launch for us in a very.
Kate Mcshane: Comprehensive.
Kate Mcshane: It's similar in terms of scale to paradigm.
Kate Mcshane: Potentially the one.
Kate Mcshane: Key differences in the irons.
Kate Mcshane: Of that and that we are launching the irons for AI smoke at a.
Kate Mcshane: Price point that fits a larger portion of the market. The paradigm iron was priced in a premium category.
Kate Mcshane: Whereas AI smoke is more consistent with our irons that are historically established higher market share positions.
Speaker Change: Thank you.
Speaker Change: The next question is from Casey Alexander with Compass Point Research. Please go ahead.
Casey Alexander: That last question was my question, so I'll step back in the queue. Thank you.
Casey Alexander: Okay.
Casey Alexander: And the next question is from Joe <unk> with Raymond James. Please go ahead.
Joe: Thanks, Hey, guys. Good afternoon first question quick one just to clarify because I think earlier, you said youre expecting golf equipment revenue to be up low single digits and I think just now you said mid to high so.
Joe: Maybe I heard two different things I, just wanted to clarify that.
Joe: Yes, Joe we're mid to high is the estimate for golf equipment, I'm, sorry, low to mid low to mid is the estimate for golf equipment. If I misspoke earlier low to mid is the correct number.
Joe: Okay in terms of that growth how much of that is coming from from pricing, obviously with the new ball launch nukes.
Joe: A new club launch this year et cetera.
Joe: Not much of it from pricing this year.
The club side of it is pretty consistent pricing as mentioned the irons.
Joe: Is at a.
Joe: Slightly lower price point than the paradigm iron.
Joe: <unk>.
Was a higher price point, so it's not.
Joe: A significant move.
Joe: Move in terms of pricing this year.
Speaker Change: Okay. Thank you.
Speaker Change: The next question is from John Kernan with Cowen. Please go ahead.
Speaker Change: Excellent.
John Kernan: Thank you.
John Kernan: I guess chip can you talk about the synergies and quantify that a little bit more between odd.
John Kernan: On course, and off course golf and how much those are embedded in your targets as you push into fiscal 'twenty six and then 28.
Speaker Change: The way out of EMEA.
Speaker Change: Our presentation today.
Chip Brewer: Sure the synergies are.
Chip Brewer: And ongoing effort John that we're unlocking here and if you look at the journey we've been on we've.
Chip Brewer: Clearly added.
Chip Brewer: Cost savings synergies with shared costs across the business, we purely ramped the growth rate of.
Chip Brewer: Top golf.
Chip Brewer: Strength in that overall organization, we believe.
Chip Brewer: And they are demonstrating some of the results there and we're really now moving into the more.
Chip Brewer: Exciting stages from our brand.
Chip Brewer: <unk> digital and a revenue perspective.
Chip Brewer: So we're well ahead of where we expected to deliver in terms of the operational efficiencies the cost of capital if you would.
Chip Brewer: Growth rates that we're delivering.
Chip Brewer: Sourcing synergies all of those have been.
Realized as per our expectation and as shown in the deck and now we're getting our arms around these digital synergies.
Brand synergies et cetera that we think can drive some significant market share in.
Chip Brewer: Revenue growth and brand strength over the coming years.
Got it thank you and then maybe Brian.
Speaker Change: Slide 24 that you have the debt today.
You show the change in leverage ratio. If you were to consider that then your financing.
Speaker Change: Rent versus.
Let's now largely considered interest expense would you consider changing the way you report a two turn difference in.
Speaker Change: Leverage ratio is pretty significant at this point.
Speaker Change: And just moves that the.
Speaker Change: The interest expense, but then you're financing interest expenses considered rent at this point.
Speaker Change: There is obviously no principal due on any of that.
Speaker Change: Landlord financings.
It looks like the market is penalizing you for some of the leverage on the balance sheet, but you consider any changes to.
Speaker Change: How does the street in your reporting.
Speaker Change: We agree with you we think that is the better way to look at it as there is no bullet or payment at the end and Thats why we tend to focus more on that.
Speaker Change: Not everyone is doing that we just providing both ways for people to look at it.
Speaker Change: But.
Speaker Change: I understand your point.
Speaker Change: The next question is from Noah <unk> with Keybanc capital markets. Please go ahead.
Hi, Thanks for taking my question, maybe just a follow up on the revenue synergies.
Noah: Just in terms of quantifying.
The revenue and adjusted EBITDA synergies related to those how should we think about what's kind of behind us in terms of.
Noah: Then what's what's ahead of us still and then Relatedly.
Noah: Just how should we think about the model.
Noah: Opportunity related to the CDP.
Noah: In Charlotte in the second half of 'twenty four.
Noah: Yes.
Noah: Sure.
Noah: Whats behind Us is clearly.
Noah: The synergies that come from cost and.
Noah: Although that will continue right, where all of these investments that we're making both at corporate and at top golf.
Provide synergy when you hear us talking about adding investments in cyber security and.
Noah: Workday other big infrastructure projects you.
Noah: You may allocate those into the corporate side of the business, but those are spread across the entire business and.
Noah: In essence a synergy.
Noah: Our ability to fund the venues to be able to use term debt effectively to have a lower cost on term debt.
Noah: Gets extended across the businesses it clear synergy that's already in place.
Noah: Scale.
Noah: Growth of the top golf business and funded initiatives.
Noah: That are clearly bearing fruit.
Noah: The revenue and brand synergies were not fully quantifying those yet, but we think theyre going to be significant we talked very clearly about the reach here right.
Noah: His top golf is got.
Noah: More than half of all golfers in the U S will visit top golf.
Noah: It is the largest source of new golfers going forward and is continuing to scale is larger than off then on for Scott.
Noah: And we obviously have an advantage and reach.
Noah: There is it can be very significant going forward. The consumer data platform is going to be very significant for us across our all of our businesses.
We've been investing in that across the business over the last year plus.
Noah: We're going to be having that up and running by the end of the year.
Noah: And it is potentially significant increasingly significant.
Noah: Starting towards the end of this year and going into next year. So stay tuned on that but it is a.
Noah: A big and important new project.
Noah: How you market to consumers and how you approach consumers and how you engage with consumers in.
Noah: In today's day and world and increasingly in the future is going to be digital.
Noah: We are going to have a reach advantage in that and some capabilities that others will not have.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to chip Brewer for any closing remarks.
Chip Brewer: I wanted to thank everybody for tuning in today I apologize that we went a little long.
We had a lot of material to cover as you can tell and we're <unk>.
Really trying to a best in class in terms of our transparency and.
Chip Brewer: Data that we present to you.
Chip Brewer: We feel very confident in our venue business, we feel very confident in our golf equipment business.
Chip Brewer: New business is clearly a long duration.
Chip Brewer: And appreciating asset.
And we've presented a lot of data that is new and in support of that so I invite you to take a while.
Chip Brewer: Look at that in due course.
Speaker Change: Thank you for your time, and we look forward to talking to you at the end of Q1.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.