Q1 2024 Topgolf Callaway Brands Corp Earnings Call
Okay.
Operator: Good day, and welcome to Topgolf Callaway Brands' first quarter of 2024 earnings conference call. Please note that today's event is being recorded, and all participants will be in a listen-only mode during the call. Should you need any assistance at any time, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad.
Good day, and welcome to top golf Callaway brands first quarter of 2024 earnings Conference call.
Operator: And to withdraw a question, please press star then two. We ask that you please limit yourself to one question and one follow-up during the Q&A session. And with that, I would like to now turn the call over to Katina Metzidakis, Vice President of Investor Relations and Corporate Communications. Please go ahead.
Katina Metzidakis: Please note that today's event is being recorded and all participants will be in a listen only mode. During the call.
Katina Metzidakis: Should you need any assistance at any time, please signal a conference specialist by pressing the star key followed by zero.
Katina Metzidakis: After todays presentation, there will be an opportunity to ask questions.
Katina Metzidakis: To ask a question you May press Star then one on your telephone keypad to withdraw a question. Please press Star then two.
Katina Metzidakis: We ask that you please limit yourself to one question and one follow up during the Q&A session.
Katina Metzidakis: With that I would like to now turn the call over to Katrina <unk>, Vice President of Investor Relations and corporate Communications. Please go ahead.
Katina Metzidakis: Thank you, Operator, and good afternoon, everyone. Welcome to Topgolf Callaway Brands' First Quarter Earnings Conference Call. I'm Katina Metzidakis, 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 first quarter financial results. We have also published an updated presentation.
Katina Metzidakis: Thank you operator, and good afternoon, everyone welcome to top golf Callaway brands first quarter earnings Conference call I'm Katina met the dockets, 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, Brian Lynch, Our Chief Financial Officer, and Chief Legal Officer.
Katina Metzidakis: Sir.
Katina Metzidakis: Earlier today, the company issued a press release announcing its first quarter financial results. We've also published an updated presentation.
Katina Metzidakis: 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 that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations.
Katina Metzidakis: Our earnings presentation as well as the earnings press release are both available on the company's Investor Relations website under the financial result tap.
Katina Metzidakis: Most of the financial numbers reported and discussed on today's call are based on U S. Generally accepted accounting principles.
Katina Metzidakis: In instances, where we report non-GAAP measures, we identified the non-GAAP measures in the presentation and reconcile the measures to the corresponding GAAP measures in accordance with regulation G.
Katina Metzidakis: Please note that this call will include forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations.
Katina Metzidakis: 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 would now like to turn the call over to Mr. Chip Brewer. Thank you.
Katina Metzidakis: 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 would now like to turn the call over to Mr. Chip for thank.
Unknown Executive: Thank you, Katina, and good afternoon, everyone. We appreciate everyone joining us on our call. I'm pleased to report strong Q1 results, continued brand strength across our portfolio, and improving operating efficiencies that are driving high confidence in a full year EBITDA forecast and higher estimates for both EPS and cash flow. Focusing on Q1, our revenue of $1.14 billion was in line with guidance, as was Topgolf's same-venue sales performance. As expected, we also gained market share in golf equipment based on compelling product launches in both clubs and balls.
Unknown Executive: Thank you Katina and good afternoon, everyone. We appreciate everyone joining our call.
Unknown Executive: This on-track revenue performance, combined with stronger-than-anticipated operating efficiencies, some favorable timing of expenses, and currency hedge gains, delivering better-than-expected EBITDA of $161 million and EPS of $0.09 in the quarter, we also delivered better-than-anticipated cash flow. As we look towards the full year, we are lowering our full year revenue expectations by $80 million, a little under 2% of full year expected revenue, due to an approximate $45 million reduction in expected Jack Wolfskin revenues due to challenging market conditions in its European business, as well as an additional currency headwind since our last call of approximately $35 million.
Unknown Executive: I'm pleased to report strong Q1 results continued brand strength across our portfolio and improving operating efficiencies that are driving high confidence in our full year EBITDA forecast.
Unknown Executive: And higher estimates for both EPS and cash flow.
Unknown Executive: Focusing on Q1, our revenue of 1.14 billion was in line with guidance as well as top golf same venue sales performance.
Unknown Executive: As expected we also gained market share in golf equipment based on compelling product launches in both clubs and balls.
Unknown Executive: This on track revenue performance.
Unknown Executive: <unk> was stronger than anticipated operating efficiencies, some favorable timing of expenses and currency hedge gains delivering better than expected EBITDA of $161 million and EPS of nine cents in the quarter. We also delivered better than anticipated cash flow.
Unknown Executive: As we look towards the full year, we are lowering our full year revenue expectations by $80 million.
Unknown Executive: Little under 2% of full year expected revenues due to an approximate 45 million dollar reduction in expected Jack Wolfe skin revenues due to challenging market conditions in its European business as well as an additional currency headwind since our last call of approximately $35 million.
Unknown Executive: Even with this revenue change, we remain confident in our overall full-year EBITDA forecast, based on our currency hedging program, improving operating margins at both our venues and our golf equipment business, as well as confidence in our core brands and market conditions. We are also increasing our full-year EPS by $0.05 per share and raising our free cash flow and embedded free cash flow estimates by approximately $60 million and $40 million, respectively.
Unknown Executive: Even with this revenue change we remain confident in our overall full year EBITDA forecast based on our currency hedging programs.
Unknown Executive: Proving operating margins at both our venues and our golf equipment business.
Unknown Executive: As well as confidence in our core brands and market conditions.
Unknown Executive: We are also increasing our full year EPS by five cents per share and raising our free cash flow and embedded free cash flow estimates by approximately $60 million and $40 million respectively.
Unknown Executive: In short, we remain on track for our organic revenue growth targets in our key brands and for our overall EBITDA growth target. And we are ahead of schedule in delivering operating efficiencies, cash flow, and EPS, as well as now beginning the process of paying down term debt. As I see it, the fundamental engine of our business continues to strengthen.
Unknown Executive: In short we remain on track for organic revenue growth targets in our key brands.
Unknown Executive: Our overall EBITDA growth targets.
Unknown Executive: And we are ahead of schedule in delivering operating efficiencies cash flow and E. P. S as well as now beginning the process of paying down term debt.
Unknown Executive: As I see it the fundamental engine of our business continues to strengthen.
Unknown Executive: Moving to our business segment, performance, Topgolf continues to make strides in our three key performance drivers. Same Venue Sales Growth, Venue Margin and Returns, and New Venue Development. As I will walk you through in a moment, we have multiple initiatives in place to lay the foundation for durable growth, attractive venue returns, and the expansion of our footprint. All of which are highly complementary to the product side of our business. First, Q1 St. Venue sales, down 7%, were in line with our expectations.
Unknown Executive: Moving to our business segment performance.
Unknown Executive: Top golf continues to make strides on our three key performance drivers same venue sales growth.
Unknown Executive: Venue margin and returns and new venue development.
Unknown Executive: As I will walk you through in a moment, we have multiple initiatives in place to lay the foundation for durable growth attractive venue returns and the expansion of our footprint.
Unknown Executive: All of which are highly complementary to the products side of our business.
Unknown Executive: First Q1 same venue sales of down 7%.
Unknown Executive: It was in line with our expectations.
Unknown Executive: As a reminder, Q1 was impacted by a post COVID surge in our corporate events business in early 2023, as well as extreme cold weather during January of this year, which we highlighted during our February earnings call. Have Q1 same venue sales stabilized after the January weather normalized? as we drive towards positive same-venue sales growth. We are executing against three key areas of opportunity, digital, experience, and value. Digital is the most rapidly developing opportunity for us to drive sales at Topgolf.
Unknown Executive: As a reminder, Q1 was impacted by a post COVID-19 surge in our corporate events business in early 2023.
Unknown Executive: As well as extreme cold weather during January of this year.
Unknown Executive: Which we highlighted during our February earnings call.
Unknown Executive: Our Q1 same venue sales stabilized after the January weather normalized.
Unknown Executive: As we drive towards positive same venue sales growth.
Unknown Executive: We're executing against three key areas of opportunity digital experience and value.
Unknown Executive: Digital is the most rapidly developing opportunity for us to drive sales at top golf and I'm pleased that our digital revenue penetration in Q1 increased to 35% versus 33% from the same period last year.
Unknown Executive: And I'm pleased that our digital revenue penetration in Q1 increased to 35% versus 33% from the same period last year. And the percentage of visitors that come through digital channels is now 62%, up 710 basis points year over year.
Unknown Executive: And the percentage of visitors that come through digital channels is now, 62% up 710 basis points year over year.
Unknown Executive: Our new and evolving digital and commercial teams are getting smarter every day, unlocking key insights and driving results. Building on this, I'm pleased to report that our cross-brand consumer data platform is now live ahead of schedule, and we expect this will greatly improve our ability to gather player insights, tailor more compelling products and offerings, and importantly, serve as the backbone necessary for a Topgolf Callaway Brand Loyalty Program slated to be in trial mode at Topgolf by the end of this year.
Unknown Executive: Our new and evolving digital and commercial teams are getting smarter every day.
Unknown Executive: Unlocking key insights and driving results.
Unknown Executive: Building on this I'm pleased to report that our cross brand consumer data platform is now live.
Unknown Executive: Head of schedule and we expect this will greatly improve our ability to gather player insights tailor more compelling products and offerings and importantly serve as the backbone necessary for a top golf Callaway brand loyalty program slated to be in trial mode at top golf.
Unknown Executive: By the end of this year.
Unknown Executive: Our second area of opportunity to drive same-venue sales is experience. We are continuing to uncover new ways to improve the player experience and offer more curated products. Towards this end, during Q1, we introduced Block Party, our first new Topgolf game since Angry Birds, which launched back in 2020. One of the great aspects of this new game is that it's fun for all player skill levels, as you score points by hitting the ball literally anywhere in the outfield.
Unknown Executive: Our second area of opportunity to drive same venue sales as experience, we are continuing to uncover new ways to improve the player experience and offer more curated products.
Unknown Executive: Towards this end during Q1, we introduced a block party, our first new top golf game since angry birds, which launched back in 2020.
Unknown Executive: One of the great aspects of this new game is it is fun for all players skill levels.
Unknown Executive: As you score points by hitting the ball literally anywhere in the outfield pitch.
Unknown Executive: Player response has been extremely positive so far, and we intend to invest in media to support greater awareness as we enter our peak summer months. On the Synergy front, we held Callaway club fitting events in venues across the country during the week of the Mass. We also implemented the Callaway Club Upgrade Program, which allows players to upgrade their Topgolf gaming experience by upgrading to our latest Callaway Clubs in all venues. And all venues now sell and promote our new Chrome Tour golf ball, as well as Callaway's seasonal decorated golf ball offering.
Unknown Executive: Player response has been extremely positive so far and we intend to invest in media to support greater awareness as we enter our peak summer months.
Unknown Executive: On the synergy front, we held Callaway club fitting events and venues across the country during the week of the Masters.
Unknown Executive: We also implemented the Callaway clubs upgrade program.
Unknown Executive: As you allows players to upgrade their top golf gaming experience by upgrading to our latest Callaway clubs in all venues.
Unknown Executive: In all venues now sell and promote our new Chrome tour golf ball as well as Callaway seasonal decorated golf ball offerings.
Unknown Executive: Our goal is to ensure that the Callaway brand is top of mind for the on-course golfers that visit Topgolf every day, a number we believe is approximately 40% of all U.S. golfers annually, as well as the new beginner golfers that Topgolf is creating.
Unknown Executive: Our goal is to ensure that the Callaway brand is top of mind for the on course golfers that visit top golf every day.
Unknown Executive: Number we believe is approximately 40% of all U S golfers annually.
Unknown Executive: As well as the new beginner golfers that top golf is creating.
Unknown Executive: Value is our third sales growth opportunity. As you are aware, we launched an in-app only, half-off gameplay promo on Mondays and Wednesdays in Q1, and we also promoted our Half-Off Tuesday. We've been pleased with the results. But perhaps more importantly, this offering was a first step towards a broader strategy to build a compelling portfolio of value offerings for a player. Looking ahead, Topgolf's commercial and digital team will continue to test and learn what works best, and our new consumer data platform will make it easier for them to gain insights as well as take action.
Unknown Executive: Value is our third sales growth opportunity.
Unknown Executive: As you are aware, we launched an in app only half off gameplay promo on Mondays and Wednesdays in Q1.
Unknown Executive: And also promoted our half off Tuesdays.
Unknown Executive: We've been pleased with the results, but perhaps more importantly, this offering was a first step towards a broader strategy to build a compelling portfolio of value offerings for our players.
Unknown Executive: Looking ahead top golfs commercial and digital team will continue to test and learn what works best and our new consumer data platform will make it easier for them to gain insights as well as take action.
Unknown Executive: To this end, this summer's primary value offering will be our new Free 30 campaign, which offers players 30 free additional minutes of gameplay when they book a bay online during specified hours on weekdays. The booking requires a small reservation fee consistent with our other reservation products.
Unknown Executive: To this end this summer as primary value offering will be our new free 30 campaign, which offers players 30 free additional minutes of gameplay when they book a bay online.
Unknown Executive: During specified hours on weekdays.
Unknown Executive: The booking requires a small reservation fee consistent with our other reservation products.
Unknown Executive: We believe this will increase what we know are more valuable digital consumers. And, based on trial results to date, this offering is expected to more effectively drive visits. With the help of our new consumer data platform, we will also be experimenting with passes and bundled offers to drive repeat visits within 60 to 90 days of an initial visit. It's worth mentioning that you can count on us to communicate these programs in a thoughtful manner, so that they increase both our bottom line as well as our top line. And this communication will increasingly be digital, personalized, and effective.
Unknown Executive: We believe this will increase what we know are more valuable digital consumers.
Unknown Executive: And based on trial results to date this offering is expected to be more effectively drive visits.
Unknown Executive: With the help of our new consumer data platform. We were also be experimenting with passes and bundled offers to drive repeat visits within 60 to 90 days of an initial visit.
Unknown Executive: It's worth mentioning that you can count on us to communicate these programs in a thoughtful manner.
Unknown Executive: So they increased both our bottom line as well as our top line.
Unknown Executive: And this communication will increasingly be digital personalized and effective.
Unknown Executive: Looking forward for Q2, we are forecasting same venue sales to be down low single digits, a nice improvement from Q1. This takes into account a slower than expected first three weeks of April as we, like many other companies, struggled with slow sales associated with year-over-year spring break and Easter timing.
Unknown Executive: Looking forward for Q2.
Unknown Executive: We are forecasting the same venue sales to be down low single digits, a nice improvement from Q1.
Unknown Executive: This takes into account a slower than expected first three weeks of April as we like many other companies struggle with slow sales associated with year over year or spring break and Easter timing.
Unknown Executive: As we've moved past this period, over the past two weeks, sales trends have returned to a more normalized and expected level. However, we are now slightly behind our full-year target. And given the choppy market conditions we have seen, and could continue to see, we are widening our full-year same-venue sales guidance from approximately flat to a new range of slightly positive down low single digits. Most importantly, we have confidence in St. Venue sales improving in the second half of the year.
Unknown Executive: As we move past this period over the past two weeks sales trends have returned to more normalized and expected levels.
Unknown Executive: However, we are now slightly behind our full year targets and.
Unknown Executive: And given the choppy market conditions, we have seen and could continue to see we're widening our full year same venue sales guidance from approximately flat.
Unknown Executive: To a new range of slightly positive to down low single digits.
Unknown Executive: Most importantly, we have confidence in the same venue sales improving in the second half of the year.
Unknown Executive: As our biggest marketing spend and consumer programs go live starting Memorial Day, and comparisons versus last year become easier, and to be clear, our internal goal is for us to transition back to positive same venue sales in the second half of this year. The teams have been working hard for this, and now that the unusual laps are behind us.
Unknown Executive: As our biggest marketing spend and consumer programs go live starting memorial day.
Unknown Executive: And compares versus last year become easier.
Unknown Executive: And to be clear our internal goal is for us to transition back to positive same venue sales in the second half of this year.
Unknown Executive: The teams have been working hard for this and now that the unusual labs are behind us. They believe they will start to deliver improved results.
Unknown Executive: They believe they will start to deliver improved results. I, for one, am confident in their direction and remain convinced that we'll be able to grow same venue sales by low single digits or better over the long term. Shifting to Margin Expansion. In Q1, we again saw strong margin performance, including a 180 basis point year-over-year increase in our venue level Ibitar margin. We continue to benefit from our pie inventory management system and new labor model, which have both now been rolled out system-wide and are delivering clear results.
Unknown Executive: I for one I'm confident in their direction and remain convinced that we'll be able to grow same venue sales low single digits or better over the long term.
Unknown Executive: Shifting to margin expansion.
Unknown Executive: In Q1, we again saw strong margin performance, including 180 basis point year over year increase in our venue level EBITDAR margin.
Unknown Executive: We continue to benefit from our Pi inventory management system, and new Labor model, which are both now been rolled out system wide and are delivering clear results.
Unknown Executive: In addition to the efficiency gains, our Q1 margin also benefited from a shift in timing of our marketing spend to focus more on post-Memorial Day programs and products. We continue to feel confident in and are consistently proving our ability to drive venue operating margins over the long term and in all kinds of market conditions. With this, we remain on track to hit our 35% EBITDA margin target for the full year.
Unknown Executive: In addition to the efficiency gains our Q1 margin also benefited from a shift in timing of our marketing spend to focus more on post memorial day programs and products.
Unknown Executive: We continue to feel confident in our consistently proving our ability to drive venue operating margins over the long term.
Unknown Executive: And in all kinds of market conditions.
Unknown Executive: With this we remain on track to hit our 35% EBITDA margin target for the full year.
Unknown Executive: Furthermore, as the profitability of our venues continues to increase, and Same Venue Sales Transitions Back to Growth, are already attractive, then your returns will become even stronger than they are today. This positions us extremely well as we continue to grow our footprint against a backdrop of significant white space. Speaking of white space and our new venue's growth opportunity, in January, we purchased a Big Shots venue in Bryan, Texas. In April, we opened a new venue in Durham, North Carolina, and just last week, we opened a new venue in Montebello, California.
Unknown Executive: Furthermore, as the profitability of our venues continue to increase and same venue sales transitions back to growth.
Unknown Executive: Our already attractive venue returns will become even stronger than they are today.
Unknown Executive: This positions us extremely well as we continue to grow our footprint against the backdrop of significant white space.
Unknown Executive: Speaking of white space in our new venues growth opportunity.
Unknown Executive: In January we purchased a big shots venue in Bryan, Texas in April we opened a new venue in Durham, North Carolina, and just last week, we opened in Montebello, California.
Unknown Executive: The Montebello venue is in our most densely populated trade area and represents our second public-private partnership. It's quite unique in that it is adjacent to two municipally owned Greengrass Golf Courses, one a traditional nine-hole course, and the second, a new part three nine-hole course with night lighting.
Unknown Executive: The amount of Belo venue isn't in our most densely populated trade area and represents our second public private partnership.
Unknown Executive: It's quite unique in that it is adjacent to two municipally owned green grass golf courses, one traditional nine hole course, and the second a new par three nine hole course with night lighting.
Unknown Executive: While we don't own or operate these courses, we believe they will be synergistic with our venues in driving interest and excitement. We are now 92 owned and operated venues in the U.S., four internationally owned venues and over a hundred globally when you include franchisees. This is testament to the strength of the business and strong execution by our world-class real estate team. Today, we are also updating our venue opening expectations for 2024 due to a delay in permitting which will push a venue plan for New Braunfels, Texas, that we expected to open in late Q4 into 2025. We now expect to add seven venues in 2024 versus the eight previously communicated.
Unknown Executive: Well, we don't own or operate these courses, we believe they will be synergistic with our venue and driving interest and excitement.
Unknown Executive: We are now 92 owned and operated venues in the U S.
Unknown Executive: Internationally owned venues and over 100 globally. When you include franchisees.
Unknown Executive: Testament to the strength of the business and strong execution by our World class real estate team.
Unknown Executive: Today, we're also updating our venue opening expectations for 2024 due to a delay in permitting which will push a venue plan for new Braunfels, Texas that we expect it to open in late Q4 into 2025.
Unknown Executive: We now expect to add seven venues in 2024 versus the eight previously communicated.
Unknown Executive: A change that should be largely immaterial to both our 2024 and long-term financial outlook. Looking ahead, excluding this year, where we intentionally pulled back to accelerate cash flow, we remain confident in our ability to average 10 new venues per year over the foreseeable future. We also remain confident in our TAM of 250 venues in the United States, with a similar number available internationally. Tourney to Golf Equipment.
Unknown Executive: A change that it should be largely immaterial to both our 2024 and long term financial outlook.
Unknown Executive: Looking ahead, excluding this year, where we intentionally pulled back to accelerate cash flow.
Unknown Executive: We remain confident in our ability to average 10, new venues per year over the foreseeable future.
Unknown Executive: We also remain confident in our Tam of 250 venues in the United States.
Unknown Executive: With a similar number available internationally.
Unknown Executive: Turning to golf equipment.
Unknown Executive: I'm pleased to report the Callaway brand continues to shine in Q1, thanks to the incredible work from our teams across R&D, supply chain, sales, marketing, and corporate. We gain share year over year in both golf ball and clubs. In Q1, Callaway held its position as the number one U.S. market share brand in Driver, Ferrywoods, and Hybrids, and focusing on our latest club launch, AI Smoke Woods, achieved the number one US model market share position in Driver, Ferrywoods, and Irons.
Unknown Executive: I'm pleased to report the Callaway brand continues to shine.
Unknown Executive: In Q1, thanks to the incredible work from our teams across R&D supply chain sales marketing and corporate.
Unknown Executive: We gained share year over year in both golf ball and clubs.
Unknown Executive: In Q1 Callaway held its position as the number one U S market share brand and driver.
Unknown Executive: Woods and hybrid.
Unknown Executive: And focusing on our latest club launch AI smoke Woods achieved the number one U S model market share position in driver very woods and irons.
Unknown Executive: In Q1, we also gained the number one US dollar market share position in putters, a position we have not enjoyed for some time and a testament to the strength of our AI1 putter launch. Joppa has also shown nice growth, especially in the premium or tour category, where Callaway achieved a new record US market share of 11% and also delivered an overall share of 19.3%, up 120 basis points year over year. That's it.
Unknown Executive: In Q1, we also gained the number one U S dollar market share position in putter.
Unknown Executive: Our position we have not enjoyed for some time and a testament to the strength of our AI one putter launch.
Unknown Executive: Golf balls also showed nice growth, especially in the premium or tour category.
Unknown Executive: Where callaway achieved a new record U S market share of 11%.
Unknown Executive: And also delivered an overall share of 19, 3% up 120 basis points year over year.
Unknown Executive: That said the strong feedback we've received on the new chrome to our product performance gives us conviction that we have further room to grow and hopefully more record market shares to report in the future.
Unknown Executive: Strong feedback we received on the new Chrome Tour product performance gives us conviction that we have further room to grow and hopefully more record market shares to report in the future. We're going to be driving this with strong advertising as well as field activation via our Chrome Tour Speed and Spin Challenge. I'm very pleased with the performance of our new launches, and we'll look forward to providing more color on the sell-through performance on our next earnings call.
Unknown Executive: We're going to be driving this with strong advertising as well as field activation via our chrome tour speed and spin challenges.
Unknown Executive: I am very pleased with the performance of our new launches.
Unknown Executive: And we'll look forward to providing more color on the sell through performance on our next earnings call.
Unknown Executive: In other categories, we continue to see strong package set sales, which leads us to believe that the positive momentum we have seen over the last several years with new entrants into the game of golf continues. And finally, I'd also like to highlight that in Q1 we saw a record 16% share in GolfGlove, leveraging our brand and distribution strength. Looking at the golf equipment business by geography, the US market and our business both remain strong, with field inventories and consumer demand both in line with expectations.
Unknown Executive: In other categories will continue to see strong package set sales, which leads us to believe that the positive momentum we have seen over the last several years with new entrants into the game of golf continues.
Unknown Executive: And finally I'd also like to highlight that in Q1, we saw record 16% share in golf glove, leveraging our brand and distribution strength.
Unknown Executive: Looking at the golf equipment business by geography, the U S market and our business both remained strong with field inventories and consumer demand both in line with expectations.
Unknown Executive: The European market started the year a little slower than expected due to poor weather conditions in the UK, but we gained share and appear well positioned to continue to do so. The Japanese market overall is up slightly on a constant currency basis.
Unknown Executive: The European market started the year, a little slower than expected due to poor weather conditions in the UK, but we gained share and appear well positioned to continue to do so.
Unknown Executive: The Japan market overall is up slightly on a constant currency basis, but our business in Q1 was down in real terms due to the currency trends as lower as well as lower sell in volumes this year versus last year as retailers are being more conservative.
Unknown Executive: But our business in Q1 was down in real terms due to the currency trends as well as lower sell-in volumes this year versus last year as retailers are being more conservative. And lastly, the Korean market has been tough this thus far in 2024, with sales down double digits as well as currency headwinds. As we look towards the balance of the year, it's worth mentioning that we have both more and larger product launches planned for the second half of this year than we did in 2023. And thus, our growth will be more second half weighted.
Unknown Executive: And lastly, the Korea market has been tough this thus far in 2024 with sales down double digits as well as currency headwinds.
Unknown Executive: As we look towards the balance of the year.
Unknown Executive: It's worth mentioning that we have both more and larger product launches planned for the second half of this year than we had in 2023 and.
Unknown Executive: And thus our growth will be more second half weighted.
Unknown Executive: This was always part of our plan and consistent with similar fall launches and product cadences that we've done in previous years. We remain on track to grow the golf equipment segment for the full year, and we continue to feel good about the overall health of golf globally. Turning to our Active Lifestyle segment, as expected and communicated on our last call, Active Lifestyle was the one segment that was down year over year in Q1. It is also now expected to be down for the full year.
Unknown Executive: This was always part of our plan and consistent with similar fall launches and product cadence is that we've done in previous years.
Unknown Executive: We remain on track to grow the golf equipment segment for the full year and we continue to feel good about the overall health of golf globally.
Unknown Executive: Turning to our active lifestyle segment as expected and communicated on our last call active lifestyle was the one segment that was down year over year. In Q1. It is also now expected to be down for the full year.
Unknown Executive: We are pleased with our Q1 performance at Travis-Matthew, which was in line with expectations but, as expected, down versus Q1 last year. As a reminder, as mentioned during our February call, we lacked a corporate channel sell-in that occurred primarily in Q1 last year and was significant relative to the size of this brand. Excluding this impact, underlying sales trends remain healthy and growing. We also remain on track to open approximately 10 stores this year, with seven leases already signed.
Unknown Executive: We are pleased with our Q1 performance at Travis Matthew which was in line with expectations, but as expected down versus Q1 last year.
Unknown Executive: As a reminder, as mentioned during our February call, we lapped our corporate channel sell in that occurred primarily in Q1 last year and was significant relative to the size of this brand.
Unknown Executive: Excluding this impact underlying sales trends remain healthy and growing well.
Unknown Executive: We also remain on track to open approximately 10 stores this year with seven leases already signed.
Unknown Executive: Travis Matthew also celebrated the one year anniversary of our women's launch, and we remain confident in our ability to continue to grow that business. We're also pleased with the relaunch of our shoe business under the Travis Matthew brand. Finally, Jack Wolfskin remained under pressure in Q1 largely due to a tough macro environment, including an over-inventory channel and soft overall market conditions in Europe.
Unknown Executive: Travis Matthew also celebrated the one year anniversary of our women's launch and we remain confident in our ability to continue to grow that business. We're also pleased with the relaunch of our shoe business under the Travis Matthew brand.
Unknown Executive: Finally, Jack will skin remained under pressure in Q1, largely due to a tough macro environment, including an over inventory channel and soft overall market conditions in Europe.
Unknown Executive: As a result, we are lowering our full-year revenue expectations for this brand. However, I think it's worth noting that, despite this market pressure, we still expect positive EBITDA growth and performance in 2024. We also continue to be pleased with the brand's performance in China. Looking forward, we're certainly not accepting of the status quo. Earlier this year, we transitioned to a new European leadership team, which has been proactively taking action to stabilize this business, return it to profitability, and drive future growth.
Unknown Executive: As a result, we are lowering our full year revenue expectations for this brand.
Unknown Executive: However, I think it's worth noting that despite this market pressure, we still expect positive EBITDA growth and performance in 2024.
Unknown Executive: We also continue to be pleased with the brand's performance in China.
Unknown Executive: Looking forward, we're certainly not accepting of the status quo.
Unknown Executive: Earlier this year, we transitioned to a new European leadership team, which has been proactively taking action to stabilize this business will return it to profitability and drive future growth.
Unknown Executive: There has been considerable progress already made, with more to come in the next few months. However, this business is a relatively small portion of our annual revenue, and an even smaller portion of our annual profit. We will update you further on these actions and our progress during our Q2 call. In closing, I'd like to thank the Topgolf Callaway Brands teams for their hard work and solid execution. Overall, we feel good about our start to 2024 and the strength of our core brands and markets.
Unknown Executive: There has been considerable progress already made with more to come in the next few months.
Unknown Executive: Although this business is a relatively small portion of our annual revenues and even smaller portion of our annual profit. We will update you further on these actions and our progress during our Q2 call.
Unknown Executive: In closing I'd like to thank the top golf Callaway brands teams for their hard work and solid execution.
Unknown Executive: Overall, we feel good about our start to 2024 and the strength of our core brands and markets. We remain confident in our EBITDA targets for this year and are taking up our cash flow and EPS targets as.
Unknown Executive: We remain confident in our EBITDA targets for this year and are taking up our cash flow and EPS targets, as well as starting the process of paying down debt. Perhaps most importantly, we believe the fundamental engine of our company is continuing to strengthen, and we feel great about the long-term direction and opportunity. With that, I'll turn the call over to Brian.
Brian: As well as starting the process of paying down debt.
Brian: Perhaps most importantly, we believe the fundamental engine of our company is continuing to strengthen and we feel great about our long term direction and opportunity.
Unknown Executive: With that I'll turn the call over to Brian.
Brian P. Lynch: Thank you, Chip, and good afternoon, everyone. As Chip mentioned, despite some unfavorable foreign currency rates and some revenue softness in our Jack Wilskin business, we had a strong start to the year overall. We had better-than-expected adjusted EBITDA and EPS on in-line revenue. Our cash used in operations improved by $79 million compared to Q1 last year. Our 2024 golf equipment product launches, including AI smoke, woods, and irons, and Chrome Tour golf balls, were well received at all levels and grew market share.
Brian: Thank you chip and good afternoon, everyone.
Brian P. Lynch: As chip mentioned, despite some unfavorable foreign currency rates and some revenue softness in our Jack <unk> business, we had a strong start to the year overall.
Brian P. Lynch: We had better than expected adjusted EBITDA and EPS on in line revenue our cash used in operations improved by $79 million.
Brian P. Lynch: Compared to Q1 last year.
Brian P. Lynch: Our 2020 for golf equipment product launches, including AI smoke Woods and irons.
Brian P. Lynch: And the Chrome tour golf balls were well received at all levels and grew market share.
Brian P. Lynch: Our inventory reduction initiatives were successful, with our consolidated inventory decreasing $227 million since Q1 last year. We successfully repriced our Term Loan B, reducing our interest rate by 60 basis points and saving approximately $7 million on an annualized basis based on current debt levels. We also repurchased an additional 1 million shares of our common stock since our last earnings call, and today we announce plans to pay down $50 million of the term loan debt at the end of May.
Brian P. Lynch: Our inventory reduction initiatives were successful with our consolidated inventory decreasing.
Brian P. Lynch: $227 million since Q1 last year.
Brian P. Lynch: We successfully repriced our term loan b.
Brian P. Lynch: Reducing our interest rate by 60 basis points and saving approximately seven.
Brian P. Lynch: $7 million on an annualized basis based on current debt levels.
Brian P. Lynch: We also repurchased an additional 1 million shares of our common stock since our last earnings call.
Brian P. Lynch: And today, we announced plans to pay down $50 million of the term loan debt at the end of May.
Brian P. Lynch: All in all, a very good quarter and what appears to still be a choppy consumer environment. I mentioned during our last call that 2024 would be an investment year, and I want to provide a little color on what we have accomplished here to date.
Brian P. Lynch: All in all a very good quarter in what appears to still be a choppy consumer environment.
Brian P. Lynch: As mentioned during our last call that 2024 were being an investment year.
Brian P. Lynch: To provide a little color on what we've accomplished year to date.
Brian P. Lynch: I am pleased to announce that in March, we successfully transitioned to our new workday enterprise management system across most of our business globally. This will improve access to and management of human capital data, which has become extremely important post-merger, now that we have over 30,000 employees, and it will also enhance our training, career development, and recruitment processes. In early April, we launched our Consumer Data Platform, which will enable us to better understand consumer behavior, preferences, and trends across our brands. We will leverage these insights to drive more impactful personalized strategies and engagements with our consumers. I want to recognize and thank our teams for their hard work bringing this to life.
Brian P. Lynch: I am pleased to announce that in March we successfully transitioned to our new Workday enterprise management system across most of our business globally.
Brian P. Lynch: This will improve access to and management of human capital data, which has become extremely important post merger now that we have over 30000 employees.
Brian P. Lynch: And it will also enhance our training career development and recruitment processes.
Brian P. Lynch: Separately in early April we launched our consumer data platform.
Brian P. Lynch: The CDP will enable us to better understand consumer behavior preferences and trends across our brands.
Brian P. Lynch: We will leverage these insights to drive more impactful personalized strategy and engagements with our consumers.
Brian P. Lynch: I want to recognize and thank our teams for their hard work, bringing this to life.
Brian P. Lynch: Now turning to our first quarter results. Consolidated revenues decreased 2% year over year to $1.144 billion, which was in line with our Q1 guidance. This decrease is attributable to a 15% year-over-year decrease in our active lifestyle business. As mentioned last quarter, we had to lap an approximate $35 million corporate channel inventory filling that occurred in the first half of 2023 in our Travis Matthew business that did not repeat in 2024.
Brian P. Lynch: Now turning to our first quarter results.
Brian P. Lynch: Consolidated revenues decreased 2% year over year to 114 4 billion.
Brian P. Lynch: Which was in line with our Q1 guidance range.
Brian P. Lynch: This decrease is attributable to a 15% year over year decrease interactive lifestyle business.
Brian P. Lynch: As mentioned last quarter, we had to lap an approximate $35 million.
Brian P. Lynch: Corporate channel inventory filling that occurred in the first half of 2023, and our Travis Matthew business that did not repeat in 2024.
Brian P. Lynch: Most of this impact was in Q1. However, these results were partially offset by 5% year-over-year growth at Topgolf and 1% year-over-year growth in golf equipment. Currency negatively impacted consolidate revenue by approximately $8 million, most of which impacted the golf equipment segment, which grew 3% on a constant currency basis. Non-GAAP first quarter net income decreased to approximately $17 million compared to last year, largely due to increased DNA and interest expense related to new Topgolf venue development.
Brian P. Lynch: Most of this impact was in Q1.
Brian P. Lynch: These results were partially offset by the 5% year over year growth at top golf and 1% year over year growth in golf equipment.
Brian P. Lynch: Currency has negatively impacted consolidated revenue by approximately $8 million.
Brian P. Lynch: Most of which impacted the golf equipment segment, which grew 3% on a constant currency basis.
Brian P. Lynch: non-GAAP first quarter net income decreased approximately $17 million compared to last year, largely due to increased D&A and interest expense related to new top golf venue development.
Brian P. Lynch: Adjusted EBITDA of $161 million increased 2% compared to last year and exceeded the high end of our guidance range due to strong venue margins at Topgolf. Timing of OPEX was shifted into the balance of the year and some incremental FX gains. Moving to segment performance, at Topgolf.
Brian P. Lynch: Adjusted EBITDA of $161 million increased 2% compared to last year and exceeded the high end of our guidance range due to strong venue margins are topped off.
Brian P. Lynch: Timing of Opex, which shifted into the balance of the year and some incremental FX gains.
Brian P. Lynch: G1 revenue grew 5% driven primarily by new venues, although partially offset by a 7% decline in same-venue sales, which was in line with expectations given the post-COVID surge in the corporate events business in Q1 2023, as Chip mentioned earlier. Topgolf operating income was $3 million in the first quarter, up slightly compared to the prior year, while adjusted EBITDA increased $12 million to $60 million. The adjusted EBITDA improvement was driven primarily by the continued improvement in venue execution and margin, as well as increased revenue.
Brian P. Lynch: Moving to segment performance.
Brian P. Lynch: At top golf.
Brian P. Lynch: Q1 revenue grew 5% driven primarily by new venues.
Brian P. Lynch: Partially offset by a 7% decline in same venue sales.
Brian P. Lynch: Which was in line with expectations given the post COVID-19 surge in the corporate events business in Q1 2023 as chip mentioned earlier.
Brian P. Lynch: <unk> operating income was $3 million in the first quarter up slightly compared to the prior year, while adjusted EBITDA increased $12 million to $60 million.
Brian P. Lynch: The adjusted EBITDA improvement was driven primarily by the continued improvement in venue execution and margin as well as increased revenue.
Brian P. Lynch: Venues continue to benefit from pie, as well as the new labor model, which has now been rolled out system-wide. Topgolf margins in Q1 also benefited from a shift in the timing of marketing spend to be more weighted toward the summer to support our exciting summer program. We have confidence in same venue sales improving in the second half of the year, given the upcoming marketing and consumer programs Chip mentioned, and as the most challenging same menu sales comps in 2023 are now behind us.
Brian P. Lynch: Venues continue to benefit from Pi as well as the new labor model, which has now been rolled out system wide.
Brian P. Lynch: Top golf margins in Q1 also benefited from a shift in the timing of marketing spend to be more weighted towards the summer to support our exciting summer programs.
Brian P. Lynch: We have confidence in the same venue sales improving in the second half of the year, given the upcoming marketing and consumer programs Chip mentioned and.
Brian P. Lynch: And is the most challenging same menu sales comps in 2023 are now behind us.
Brian P. Lynch: Our internal goal is to transition back to positive same venue sales during the second half of the year. Moving on to Q1 results for golf equipment. Revenue increased 1% year-over-year to $450 million, primarily due to strong momentum from our recent club and ball line, although partially offset by unfavorable changes in foreign currency rates and softness in Asia. Importantly, our core US golf equipment business revenue grew high single digits. Golf equipment operating income of $82 million increased 1% year over year due to the increased revenue.
Brian P. Lynch: Our internal goal is to transition back to positive same venue sales during the second half of the year.
Brian P. Lynch: Moving to Q1 results for golf equipment revenue increased 1% year over year to $450 million, primarily due to strong momentum from our recent club and ball launches.
Brian P. Lynch: Partially offset by unfavorable changes in foreign currency rates and softness in Asia.
Brian P. Lynch: Importantly, our core U S golf equipment business revenue grew high single digits.
Brian P. Lynch: Golf equipment operating income was $82 million increased 1% year over year due to the increased revenue.
Brian P. Lynch: The interactive lifestyle segment Q1 revenue decreased 15% year over year, primarily due to lapping the corporate channel fill-in and Travis Matthews that I mentioned earlier. In addition, our Jack Wolfskin business, which represents less than 10% of our total sales, is facing challenging market conditions in Europe, including high retail inventory levels and overall soft market conditions.
Brian P. Lynch: Interactive lifestyle segment Q1 revenue decreased 15% year over year, primarily due to lapping the corporate channel fill and Travis Matthew that I mentioned earlier.
Brian P. Lynch: In addition, our Jack <unk> business, which represents less than 10% of our total sales is facing challenging market conditions in Europe, including high retail inventory levels and overall soft market conditions.
Brian P. Lynch: As a result, we expect that business to be down for the full year. As Chip mentioned, we have a new management team, and we are actively working to optimize that business. Operating income decreased to $25 million compared to $37 million in the prior year. This decrease was driven by lower cell sales.
Brian P. Lynch: As a result, we expect that business to be down for the full year.
Brian P. Lynch: As chip mentioned, we have a new management team and we are actively working to optimize that business.
Brian P. Lynch: Operating income decreased to $25 million compared to $37 million in the prior year.
Brian P. Lynch: The decrease was driven by the lower sales.
Brian P. Lynch: Turning to the balance sheet, I'd like to highlight the term debt repricing we successfully completed in March, which lowered the interest rate on our Term Loan B by 60 basis points and resulted in an annualized interest savings of $7 million based on current principal levels. In addition, since our last earnings call, we've repurchased 1 million shares in open market transactions for a total cost of $16 million. We also continue to have ample liquidity, which is comprised of cash on hand and borrowing capacity under our credit facilities.
Brian P. Lynch: Turning to the balance sheet I'd like to highlight the term debt repricing, we successfully completed in March which lowered the interest rate on our term loan b by 60 basis points.
Brian P. Lynch: And resulted in annualized chart annualized interest savings of $7 million based on current principal levels.
Brian P. Lynch: In addition, since our last earnings call, we have repurchased 1 million shares in open market transactions for a total cost of $16 million.
Brian P. Lynch: We also continue to have ample liquidity, which is comprised of cash on hand, and borrowing capacity under our credit facilities.
Brian P. Lynch: As of March 31st, 2024, our available liquidity increased $94 million to $720 million compared to the prior year due to better cash flow generation as the company continues to manage costs and more efficiently manage working capital, especially with regard to inventory. Given our strength in the cash flow outlook and strong liquidity position, we now plan to pay down $50 million of the principal amount of our term loan debt at the end of this month.
Brian P. Lynch: As of March 31, 2024, our available liquidity increased $94 million to $2.
Brian P. Lynch: $720 million compared.
Brian P. Lynch: Compared to the prior year due to better cash flow generation as the company continues to manage costs and more efficiently manage working capital, especially with regards to inventory.
Brian P. Lynch: Given our strengthening cash flow outlook and strong liquidity position, we now plan to pay down $50 million of the principal amount of our term loan debt at the end of the month.
Brian P. Lynch: At quarter end, we had total net debt of $2.4 billion, which excludes convertible debt of approximately $258 million, compared to $2.2 billion in Q1 2023. This increase is attributable to increased venue financing debt related to new venues. As a reminder, we think it is also helpful to evaluate our net leverage position by excluding the venue financing REIT debt, which is akin to capitalized rent with no additional principal or bullet repayment required.
Brian P. Lynch: At quarter end, we had total net debt of $2 4 billion.
Brian P. Lynch: Which excludes convertible debt of approximately $258 million.
Brian P. Lynch: Compared to $2 2 billion in Q1 2023.
Brian P. Lynch: This increase is attributable to increased venue financing debt related to new venues.
Brian P. Lynch: As a reminder, we think it is also helpful to evaluate our net leverage position by excluding the venue financing REIT debt, which is akin to capitalized rent with no additional principal or bought repayment required.
Brian P. Lynch: Excluding the REIT debt, our REIT adjusted net debt is $1.1 billion, compared to $1.3 billion as of Q1 2023. Our net debt leverage, which excludes convertible debt, was 4.0 times at March 31st, 2024, compared to 4.1 times in the prior year. This change was driven by increased EBITDA and improved cash flow, which more than offset the increased venue financing debt. Our adjusted net debt leverage ratio is 2.2 times compared to 2.5 times in the prior year. We feel very comfortable at this Leverage for Leverage.
Brian P. Lynch: Excluding the REIT debt adjusted net debt is $1 1 billion <unk>.
Brian P. Lynch: Compared to $1 3 billion as of Q1 2023.
Brian P. Lynch: Our net debt leverage which excludes convertible debt was 4.0 times at March 31, 2024, compared to four one times in the prior year.
Brian P. Lynch: This change was driven by increased EBITDA and improved cash flow, which more than offset the increased venue financing debt.
Brian P. Lynch: Our REIT adjusted net debt leverage ratio was two two times compared to two five times in the prior year we.
Brian P. Lynch: We feel very comfortable at these leverage levels.
Brian P. Lynch: Our inventory balance decreased $227 million, or 24%, from $930 million as of Q1 2023 to $703 million at the end of Q1 2024. A significant achievement by our teams who have worked diligently to manage inventory to more reasonable levels after a post-COVID surge. We feel good about our current level and overall quality of our inventory. Capital expenditures for the first three months of 2024 were $65 million.
Brian P. Lynch: Our inventory balance decreased $227 million or 24% from $930 million as of Q1 2000 $23 million to $703 million at the end of Q1 2024.
Brian P. Lynch: A significant achievement by our teams who have worked diligently to manage inventory to more reasonable levels. After post COVID-19 surge.
Brian P. Lynch: We feel good about our current level and overall quality of our inventory.
Brian P. Lynch: And we received reimbursements of $27 million from our rearrangements for net capital expenditures of $38 million, of which $28 million is related to top. Now turning to our balance of your outlook. As mentioned earlier, given the unfavorable change in FX rates and the softness in the Jack Wolfskin Europe business, we are lowering our full year 2024 revenue guidance range by $80 million to a range of $4.435 billion to $4.4 Approximately $35 million of this decrease is attributable to FX, and the other $45 million to Jack Wilson.
Brian P. Lynch: Capital expenditures for the first three months of 2024 was $65 million and we received reimbursements of $27 million from our re arrangements for net capital expenditures of $38 million.
Brian P. Lynch: $28 million is related to top graph.
Brian P. Lynch: Now turning to our balance of year outlook as.
Brian P. Lynch: As mentioned earlier, given the unfavorable change in FX rates and the softness in the JAK Wolfson Europe business.
Brian P. Lynch: We're lowering our full year 2020 for revenue guidance range by $80 million to a range of $4 435 billion to $4 $4 75 billion.
Brian P. Lynch: Approximately $35 million of this decrease is attributable to FX and the other $45 million to Jack <unk>.
Brian P. Lynch: Despite the drop in revenue guidance, we remain confident in our adjusted EBITDA guidance given the strength of our core business and FX hedging program. As a result, we are reiterating our full-year adjusted EBITDA guidance of $620 to $640 million. By segment at Topgolf, we continue to guide to approximately $1.96 billion in revenue and approximately $350 million in adjusted EBITDA, which is unchanged from prior guidance. As Chip mentioned, we are slightly adjusting our Topgolf same-menu sales growth expectations to a range of slightly up to down low single digits, which includes an anticipated improvement in trends in the second half of the year as our summer initiatives take hold and also as year-over-year comparisons become easier.
Brian P. Lynch: Despite the drop in revenue guidance, we remain confident in our adjusted EBITDA guidance, given the strength of our core business and FX hedging program.
Brian P. Lynch: As a result, we are reiterating our full year adjusted EBITDA guidance of $6 1 million to $640 million.
Brian P. Lynch: By segment at top Golf, we continued to guide to approximately $1 $96 billion in revenue and approximately $350 million and adjusted EBITDA.
Brian P. Lynch: Which is unchanged from prior guidance.
Brian P. Lynch: As chip mentioned, we are slightly adjusting our top golf, saying that new sales growth expectations.
Brian P. Lynch: To a range of slightly up to download single digits.
Brian P. Lynch: Which includes an anticipated improvement in trend in the second half of the year as our summer initiatives take hold and also as year over year comparisons become easier.
Brian P. Lynch: In golf equipment, even after taking into account the increased FX headwinds, we expect to grow revenue in this segment this year, given the strength of our product line and incremental second half launches. It is important to highlight that overall, our new product launches will be more weighted towards the back half of 2024 versus last year, when new launches were more Q2 weighted. We also continue to expect profits to be up in this segment for the year and in Active Lifestyle given unfavorable FX rates and the softness in the Jack Wilson business. However, we expect revenue and operating income to be down year over year in this segment. As a result of the repricing of our term room, B.
Brian P. Lynch: And golf equipment, even after taking into account the increased FX headwinds, we expect to grow revenue in this segment. This year given the strength of our product line and incremental second half launches.
Brian P. Lynch: It is important to highlight that overall, our new product launches will be more weighted towards the back half of 2024 versus last year, when new launches were more Q2 weighted.
Brian P. Lynch: We also continue to expect profits to be up in this segment for the year.
Brian P. Lynch: And active lifestyle, given unfavorable FX rates and the softness in the Jack <unk> business, we expect revenue and operating income to be down year over year in this segment.
Brian P. Lynch: As a result of the repricing of our term loan b.
Brian P. Lynch: Participated Debt Paydown, and Higher Cash Flow Outlook. We are raising our full-year EPS guidance range by $0.05 to $0.31 to $0.39. Our debt repricing will provide approximately $0.025 benefit in 2024. The $50 million expected paydown in debt should also provide approximately one cent benefit this year.
Brian P. Lynch: Anticipated debt Paydown and higher cash flow outlook, we are raising our full year EPS guidance range by five to.
Brian P. Lynch: <unk> 31 to 39.
Brian P. Lynch: Our debt repricing will provide approximately two five benefit in 2024.
Brian P. Lynch: The 50 million dollar expected paydown in debt should also provided approximately <unk> <unk> benefit this year and the balance is related to higher expected income on investing the increased cash flow.
Brian P. Lynch: And the balance is related to higher expected income when investing the increased cash flow, shifting gears as compared to prior guidance. Free cash flow is expected to improve by approximately $60 million due to working capital improvements, lower cash interest, and a shift in the timing of growth capex to next year. We are also forecasting better than expected EBITDA free cash flow and embedded free cash flow versus prior guidance due to working capital improvements in our golf equipment and active lifestyle segment.
Brian P. Lynch: Shifting gears as compared to prior guidance.
Brian P. Lynch: Free cash flow is expected to improve by approximately $60 million due to working capital improvements lower cash interest and a shift in timing of growth Capex for next year.
Brian P. Lynch: We are also forecasting better than expected EBITDA free cash flow.
Brian P. Lynch: Embedded free cash flow versus prior guidance due to working capital improvements and our golf equipment and active lifestyle segments.
Brian P. Lynch: As a result, free cash flow and embedded free cash flow are expected to be approximately $165 million and $265 million, respectively, which represents a $60 million and $40 million improvement versus prior guidance, respectively. We expect total net CapEx to be $20 million lower than our previous guidance of $200 million due to the timing of Topgolf growth CapEx mentioned above. Now turning to Q2 specifically. In Q2, we expect consolidated revenue. 1.18 to 1.20 billion versus 1.18 billion in Q2 2023. Or in other words, flat to slightly up.
Brian P. Lynch: As a result free cash flow and better free cash flow are expected to be approximately $165 million and $265 million respectively, which.
Brian P. Lynch: Which represents a $60 million and $40 million improvement versus prior guidance respectively.
Brian P. Lynch: We expect total net capex to be $20 million lower than our previous guidance of $200 million due to timing of top golf growth Capex mentioned above.
Brian P. Lynch: Now turning to Q2, specifically in Q2, we expect consolidated revenue.
Brian P. Lynch: Ed.
Brian P. Lynch: 118 to $1 two zero billion versus $1 8 billion in Q2 2023.
Brian P. Lynch: Or in other words flat to up slightly.
Brian P. Lynch: We estimate adjusted EBITDA to be in the range of $191 to $201 million, compared to $206 million in the prior year. In Q2 at Topgolf, we expect to be up in revenue and operating income year over year due to the new venues since Q2 last year. In Q2, gothically, we are being impacted by the shift in timing of launches from Q2 last year to the second half of 2024. In Q2 last year, we launched our big berth of woods and irons, which is an approximate $30 million impact compared to Q2 this year.
Brian P. Lynch: We estimate adjusted EBITDA to be in the range of $191 million to $201 million.
Brian P. Lynch: Compared to $206 million in the prior year.
Brian P. Lynch: In Q2 of top golf, we expect to be up in revenue and operating income year over year due to the new venues since Q2 last year.
Brian P. Lynch: In Q2 golf equipment were being impacted by the shift in timing of launches from Q2 last year to the second half of 2024.
Brian P. Lynch: In Q2 last year, we launched our big Bertha Woods, and Irons, which has an approximate $30 million impact compared to Q2 this year.
Brian P. Lynch: As a result, we expect this segment to be down in revenue and operating income year over year for the second quarter, but, as previously mentioned, up for the full year. In Q2 in active lifestyle, we expect to be down in revenue year over year, as Travis Matthew will be lapping the remaining portion of the corporate channel fill in, and separately, market conditions in Europe and our Jack Wolfson business are expected to remain soft in Q2.
Brian P. Lynch: As a result, we expect this segment to be down in revenue and operating income year over year for the second quarter, but as previously mentioned up for the full year.
Brian P. Lynch: In Q2, and active lifestyle, we expect to be down in revenue year over year as Travis Matthew will be lapping the remaining portion of the corporate channel fill in and separately market conditions in Europe, and our Jack <unk> business are expected to remain soft in Q2.
Brian P. Lynch: As a result, we would expect to be down in operating income as well in this segment.
Brian P. Lynch: Overall, we are pleased with our start to the year and are confident in the strength of our core business as.
Brian P. Lynch: As a result, we feel comfortable committing to paying down the $50 million of term loan debt.
Brian P. Lynch: We're optimistic for the balance of the year.
Brian P. Lynch: As a result, we would expect to be down in operating income as well in this segment. Overall, we are pleased with our start to the year and confident in the strength of our core business. As a result, we feel comfortable committing to paying down the $50 million of term loan debt. We are optimistic for the balance of the year. Operator, I'm turning the call over to you.
Speaker Change: We will now open the call for questions operator over to you.
Brian P. Lynch: Yes.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad, and if you're using a speakerphone, please pick up your handset before pressing the key. To withdraw a question, you may press the star, then two. And again, we ask that you please limit yourself to one question and one follow-up during Q&A. At this time, we will take our first question, which will come from Matthew Boss with J.P. Morgan. Please go ahead.
Speaker Change: We will now begin the question and answer session.
Operator: To ask a question you May press Star then one on your telephone keypad and if youre using a speakerphone. Please pick up your handset before pressing the keys.
Operator: To withdraw your question you May Press Star then two.
Operator: And again.
Matthew Robert Boss: Please limit yourself to one question and one follow up during Q&A.
Operator: At this time, we will take our first question will come from Matthew Boss with JP Morgan. Please go ahead.
Matthew Robert Boss: Great, thanks. So maybe just to kick off, Chip, could you elaborate on market share gains that you cited, customer response, and maybe wholesale feedback from your AI Smoke and Chrome Tour ball launches? Or any change in the growth assumptions for golf equipment this year outside of foreign exchange?
Matthew Robert Boss: Great. Thanks.
Matthew Robert Boss: So maybe just to kick off chip could you elaborate on market share gains that you sided customer response, and maybe wholesale feedback from your AI smoke and Chrome tour ball launches just any change in the growth assumptions for golf equipment. This year outside of foreign exchange.
Unknown Executive: Yeah, hey Matt. The market share gains for AI Smoke and the strength of the brand remain quite strong. So, if you look at our U.S. market share, which is the most accurately and clearly identified and reported, you know, we were up 210 basis points in the hard goods segment, which combines clubs and balls. We were up 230 basis points in clubs, and we were up 120 basis points in balls with a record market share in the premium category.
Chip: Yeah, Hey, Matt.
Matthew Robert Boss: The.
Unknown Executive: Market share gains for AI smoke in the strength of the brand.
Unknown Executive: Hi remains quite strong so.
Unknown Executive: If you look at our U S market share, which is the most accurately and clearly.
Unknown Executive: <unk> identified and report reported.
Unknown Executive: We were up 210 basis points in the hard goods segment, which combines clubs and balls.
Unknown Executive: We were up 230 basis point in clubs.
Unknown Executive: And we are up 120 basis point in ball with.
Unknown Executive: A record market share in the premium category. So.
Unknown Executive: So, and then I mentioned all the number one brand positions that we have and the number one model positions for AI Smoke. And I'm quite pleased with the strength of the brand and the market reception. And then we have a very robust and strong second half product pipeline and plan that we mentioned in all of our scripts as well.
Matt: And then I mentioned, all the number one brand positions that we have and the number one model positions for AI smoke so.
Unknown Executive: And are quite pleased with the strength of the brand and the market reception and then we have a very robust and strong second half.
Unknown Executive: Our product pipeline and plan that we mentioned in all of our scripts as well.
Matthew Robert Boss: Great. And then maybe as a follow-up on Topgolf, could you just elaborate on the choppy conditions that you're seeing, or maybe just drivers of the April softness between traffic or price? And then just how best to rank the initiatives in place as the year progresses to return to positive comps in the back half?
Speaker Change: Great and then maybe as a follow up on on top golf could you just elaborate on the choppy conditions that youre seeing or maybe just drivers of the April softness between traffic our price.
Matthew Robert Boss: Then just how best to rank the initiatives in place as the year progresses to return to positive comps in the back half.
Matthew Robert Boss: Sure.
Matthew Robert Boss: Hi.
Unknown Executive: [inaudible] you know, so this year we've had two periods of marked volatility this year in our same-venue sales results, Matt. We had the January period where it was strictly weather, you know, extremely cold weather. And yes, it's always cold in January, but it was extremely, you know, more than normal.
Matthew Robert Boss: So we.
Matthew Robert Boss: We've had two periods.
Unknown Executive: Market volatility this year.
Unknown Executive: In our same venue sales results, Matt we had January.
Unknown Executive: Period, where it was strictly weather extremely cold weather and yes, it's always called in January but it was extremely.
Unknown Executive: More than normal and we saw a marked drop in performance then and then we saw a similar but severe drop in the first three weeks of April the timed with the Easter and spring break and so basically those.
Unknown Executive: And you know, we saw a marked drop in performance then. And then we saw a similar but, you know, severe drop in the first three weeks of April that coincided with Easter and spring break. And so basically, those periods shifted in timing, and there was less spring break time available, you know, prior to Easter this year in a condensed period that had an impact on our same-venue sales. So we saw traffic down in that period significantly and, you know, weakness in that period. Outside of those periods of volatility, the trends have been pretty good, really, really, you know, our three plus Bay is stabilizing. And the one to two Bay is stable, and, you know, periods flat to slightly up, mostly.
Unknown Executive: Periods of shifted in timing and there was less spring break time available prior to Easter This year and a condensed.
Unknown Executive: Period that had an impact on our.
Unknown Executive: Same venue sales. So we saw traffic down in that period significantly and weakness in that period.
Unknown Executive: Outside of those periods of volatility.
Unknown Executive: <unk> been pretty good really are three plus bay is stabilizing and the 1% to two bay is stable in periods flat to slightly up mostly so it's a positive story and a story that we have.
Unknown Executive: So it's a, you know, positive story and one that we have seen for some time now. We have a lot coming in terms of initiatives. You know, we have a new ad campaign. We've moved some of our marketing spend. We have a new game. We have other new energy we're bringing, you know, throughout the summer. We have a new value offering that we're testing now called Free 30 bundles and passes that we're going to be implementing some event offerings.
Unknown Executive: <unk> seen for some time right now in <unk>, we have a lot coming in terms of initiatives.
Unknown Executive: We have a new AD campaign.
Unknown Executive: We're moving some of our marketing spend.
Unknown Executive: A new game.
Unknown Executive: We have.
Unknown Executive: Other new energy or bringing throughout the summer.
Unknown Executive: We have a new value offering that we're testing now called free 30.
Unknown Executive: Bundles and passes we're going to be implementing some event.
Unknown Executive: Offerings.
Unknown Executive: You know, we're really building our focus and capability around this same venue sales, but we're doing it, you know, in a way that I believe is prudent, so that we're not going to damage the long-term brand or profitability of the business. We're going to continue to deliver on the things that matter most, the cash flows. And you've seen what a nice track record we have on the, you know, overall profitability of the venues, etc.
Unknown Executive: We're really building our focus and capability around this same venue sales, but we're doing it in a way that I believe is prudent so that we're not going to damage the long run brand or profitability of the business, we're going to continue to deliver on the things that matter most to cash flows and you've seen what a nice track record.
Unknown Executive: Have on the.
Unknown Executive: Overall profitability of the venues et cetera, but we have quite a bit coming.
Unknown Executive: But we have quite a bit coming. We've had some, you know, periods of volatility. And when you look past those, there are a lot of reasons where we like the trends and feel confident in the long-term outlook. Great color, Chip. Best of luck.
Unknown Executive: Had some periods of <unk>.
Unknown Executive: Volatility and when you look past those.
Unknown Executive: A lot of reasons, where we like the trends and feel confident in the long term outlook.
Unknown Executive: Great color best of luck.
Chip: Thank you.
Unknown Executive: And our next question will come from Alex Perry with Bank of America. Please go ahead.
Unknown Executive: And our next question will come from Alex Perry with Bank of America. Please go ahead.
Alexander Thomas Perry: Thanks for taking my questions here. I guess just first, how should we think about the corporate events business versus walk-in and QQM for the rest of the year, especially given the events comps get much easier in the second quarter? Thanks.
Alexander Thomas Perry: Alright, thanks for taking.
Alexander Thomas Perry: Thanks for taking my questions here I guess, just first how should we think about the corporate events business versus walk in and and <unk> for the rest of the year, especially given the events comps get much easier in the second quarter.
Unknown Executive: Alex, it's really a consistent story that you're going to see, and you've seen over many quarters now. The events business is clearly stabilizing and gliding toward flat. After we get it to flat, we're going to go grow it. But right now, we saw a massive surge in that business that was essentially post-COVID. There had been some reversion of that, but we see it clearly stabilizing now. And you know, we're... feeling good about the trend.
Alexander Thomas Perry: Alex.
Unknown Executive: Really a consistent story that youre going to see and you've seen over over many quarters now the.
Unknown Executive: The events business is clearly stabilizing.
Unknown Executive: And gliding towards flat.
Unknown Executive: After we get it to flat, we're going to go grow it but right now.
Unknown Executive: We saw a massive surge in that business.
Unknown Executive: That was essentially post COVID-19.
Unknown Executive: There had been some reversion of that we see it clearly stabilizing now and.
Speaker Change: We are.
Unknown Executive: Feeling good about the trend.
Unknown Executive: The one to two bay, you know, we have had those two periods of volatility that I called out. Other than that, flat to slightly up, with, you know, a number of initiatives that we're calling out and working on to continue to drive, you know, improvement, and we're confident in the direction of same venue sales. We believe it will continue to improve.
Unknown Executive: The one to two bay.
Unknown Executive: <unk> had those two periods of volatility that I called out.
Unknown Executive: Other than that.
Unknown Executive: <unk> to slightly up with.
Unknown Executive: A number of initiatives that were.
Unknown Executive: Calling out and working on to continue to drive.
Unknown Executive: Improvement in we're confident in the direction of same venue sales.
Unknown Executive: We believe it will continue to improve.
Alexander Thomas Perry: That's really helpful. And then just my follow-up on the Topgolf Full Year Revenue Guidance, I think you kept the revenue guide the same, but you sort of lowered the implied midpoint of the same venue sales guidance and have, you know, one less venue versus the prior guide, albeit it was supposed to come at the end of the year. Is there, you know, is there anything there?
Speaker Change: That's really helpful. And then just my follow up on the top call full year revenue guidance. I think you kept the revenue guide the same but sort of lowered the implied midpoint of the same then your sales guidance and have one lots venue versus the prior guide, albeit it was supposed to come at the end of the year is there is there anything there.
Alexander Thomas Perry: This sort of better in the venue Ram.
Alexander Thomas Perry: Or is that more.
Alexander Thomas Perry: More sort of rounding.
Unknown Executive: Is this, you know, sort of a better new venue ramp? Or is it, you know, more sort of rounding things off? More rounding, Alex. We have enough room in the results to we, you know, we didn't move the same venues as the guide materially, in my opinion. And the, you know, overall results in the guide had enough. Perfect. That's very helpful. Best of luck going forward.
Alexander Thomas Perry: More rounding.
Alexander Thomas Perry: Alex.
Unknown Executive: We have enough room in the results too.
Unknown Executive: We didn't move the same venues as guide materially in my opinion.
Unknown Executive: And.
Unknown Executive: The.
Unknown Executive: Overall results in the guide had enough firm.
Unknown Executive: Perfect. That's very helpful best of luck going forward.
Speaker Change: Thank you.
Megan Christine Alexander: Our next question will come from Megan Alexander with Morgan Stanley. Please go ahead.
Unknown Executive: Our next question will come from Megan Alexander with Morgan Stanley. Please go ahead.
Megan Christine Alexander: Hey, good afternoon. Thanks so much.
Megan Christine Alexander: Hey, good afternoon. Thanks, so much I don't want to harp on it but maybe just to put a finer point on that.
Megan Christine Alexander: Those questions around the top golf and by New sales Guide is is it fair to assume that you are running down low single digits quarter to date, but that the last few weeks were maybe better than that and then it seems like the reason for maybe widen widening marine can bring it down a little bit is that just more a bit choppy in April but.
Megan Christine Alexander: You were also.
Megan Christine Alexander: Including positive at the high end so is that just a reflection of.
Megan Christine Alexander: I don't want to harp on it, but maybe just to put a finer point on those questions around the Topgolf Same Venue Sales Guide. Is it fair to assume that you're running down low single digits quarter to date but that the last few weeks were maybe better than that? And then it seems like the reason for, you know, maybe widening, widening the range and bringing it down a little bit? Is that just things were a bit choppy in April, but you were also, you know, including positive? At the high end now? So is that just a reflection of, you know, you're perhaps a little bit more confident in the initiative driving an improvement in the back half?
Megan Christine Alexander: Youre, perhaps a little bit more confidence and the initiatives driving an improvement in the back half.
Unknown Executive: Megan, we were worse than that in the first three weeks of April. So those were, you know, markedly down, and, you know, since then, over the last two weeks, we have been, you know, stabilizing, and it is performing consistent with our expectations and, you know, how we've been planning the business. And all of that is, um, you know, without a lot of dry powder still to come right with all of these initiatives that we're talking about that really start to ramp up end of May and early June.
Megan Christine Alexander: Megan we were worse than that in the first three weeks of April so those were markedly down and.
Unknown Executive: Since that over the last two weeks we have been.
Unknown Executive: It has stabilized and is performing.
Unknown Executive: Consistent with our expectations.
Unknown Executive: And how we've been planning the business and now all of that is.
Unknown Executive: Without with a lot of dry powder still to come right with all of these initiatives that we're talking about that are really start to ramp end of May early June.
Unknown Executive: But the April period was, you know, down, you know, I think high single digits or something in that range. And that put us a little behind for the full year. And the rest of the guide changes are just us being somewhat conservative. You know, there's, you know, there's an opportunity for us to, you know, outperform this. But we've got to recognize that we've had some volatility and that, you know, the consumer out there is getting a lot of other value offerings, and we may or may not strengthen as the year goes on.
Unknown Executive: But the April period was.
Unknown Executive: Down.
Unknown Executive: I think high single digits or something in that.
Unknown Executive: Range.
Unknown Executive: And that put us a little behind for the full year and the rest of the guide change is just us being somewhat conservative.
Unknown Executive: There is.
Unknown Executive: There is an opportunity for us too.
Unknown Executive: Outperform this.
Unknown Executive: But we've got to recognize that we've had some volatility.
Unknown Executive: And that the consumer out there.
Unknown Executive: Is getting a lot of other value offerings, and we may or may not strengthened as the year goes on.
Megan Christine Alexander: Okay. That's helpful, Chip. Thank you. And then, maybe just a question for Brian.
Speaker Change: Understood. That's helpful. Thank you and then maybe just a question for Brian is there any way to quantify the Jack will scan and FX impact to EBITDA.
Brian P. Lynch: Is there any way to quantify the Jack Wolfskin and FX impact on EBITDA? You did maintain the guide for EBITDA. I think Topgolf was unchanged. So is there, is golf equipment, is the expectation in that business a little bit better to offset the headwinds from Jack Wolfskin and FX from an EBITDA perspective?
Brian P. Lynch: You did maintain the guide for EBITDA, I think top off with unchanged, though.
Brian P. Lynch: There is golf equipment is the expectation in that business, a little bit better to offset that.
Brian P. Lynch: The headwinds from Jack will describe in FX from an EBITDA perspective.
Megan Christine Alexander: That's a good question, Megan. Again, as you correctly noted, the change in the revenue guide is $35 million related to changes in foreign currency and $45 million related to the Jack Wolfskin business. Now on the foreign currency piece, we do, it doesn't completely offset it, but we have a hedging program that will minimize the impact of the change in FX on the bottom line, you know, not completely, but to a large extent.
Speaker Change: Yeah, that's a good question Megan.
Megan Christine Alexander: Again as you correctly noted the change in the revenue guide is $35 million related to.
Megan Christine Alexander: Changes in foreign currency and $45 million related to the Jack <unk> business now.
Megan Christine Alexander: Now on the foreign currency piece, we do it doesn't completely offset it but we have a hedging program that will minimize the impact of the change in FX on the bottom line.
Megan Christine Alexander: And then the Jack Wolfson business is taking actions to manage costs. And, you know, as they go through, as Chip mentioned, they were going through a new management team going through the whole business. They'll manage costs in light of the drop in revenue, and then also, as part of the drop in revenue is related to underperforming portions of his business. So as they exit or fix those, that should improve profitability. And then we're also managing costs across all of our businesses.
Megan Christine Alexander: Not completely but to a large extent and then the Jack <unk> business is taking actions to manage costs.
Megan Christine Alexander: As they go through as Chip mentioned Theyre going through New management team go through the whole business.
Megan Christine Alexander: They'll manage costs in light of the drop in revenue and then also as part of the drop in revenues related to underperforming portions of this business so as they exit or fixed those that should improve profitability.
Megan Christine Alexander: And then we're also managing cross costs across all of our businesses, but more importantly, we continue to drive operating efficiencies in our top golf and golf equipment business Q1 is a great example is we were able to absorb the FX impact and Jack will skin Europe softness, while increasing EBITDA. So we're fairly confident in our ability to hit the EBITDA.
Megan Christine Alexander: But more importantly, we continue to drive operating efficiencies in our Topgolf and golf equipment business. Q1 is a great example, as we were able to absorb the FX impact and Jack Wolfskin Europe softness while increasing EBITDA. So we are fairly confident in our ability to hit the EBU.gov.
Speaker Change: Got it.
Brian P. Lynch: super helpful. Maybe if I could just clarify, it doesn't it doesn't seem like you're kind of assuming there's something that picks up the slack. It's just There are things that are, you know, from an EBITDA perspective, the flow through is a bit muted. Is that fair?
Speaker Change: Super helpful and maybe if I could just clarify it doesn't it doesn't seem like you're kind of assuming there.
Brian P. Lynch: Something that that picks up the slack.
Brian P. Lynch: Sure.
Speaker Change: There are things that are.
Speaker Change: And EBITDA perspective.
Speaker Change: You bet needed is that fair.
Megan Christine Alexander: Well, the other parts of the business will be able to help pick up any slack if Jack Wolf is not able to offset the entire amount. The other businesses are improving their efficiencies, and I think they'll pick it up. Okay, awesome.
Speaker Change: Well the other parts of the business will be able to help pick up any slack if Jack walk is not able to offset the entire amount.
Megan Christine Alexander: Other businesses are improving their efficiencies and I think they will pick it up.
Brian P. Lynch: Okay, awesome. That's helpful.
Speaker Change: Okay. That's helpful. Thank you.
Megan Christine Alexander: Thank you. And our next question will come from Kate McShane with Goldman Sachs. Please go ahead. Hi, good afternoon. Thanks for taking our questions.
Katharine Amanda McShane: And our next question will come from Kate McShane with Goldman Sachs. Please go ahead.
Brian P. Lynch: And our next question will come from Kate Mcshane with Goldman Sachs. Please go ahead.
Katharine Amanda McShane: Hi, good afternoon, thanks for taking our questions.
Katharine Amanda McShane: We wanted to ask first about the impact of the new labor model to your margins is there a way to quantify how much it impacted Q1, how should we think about its contribution throughout the rest of the year and then our second question was just around.
Katharine Amanda McShane: Thoughts about capital allocation, given some of the Ara comment.
Katharine Amanda McShane: Comments today about your debt.
Katharine Amanda McShane: Sure, I'll take the first one, and then Brian, I'll pass that second part on capital allocation to you. So you've seen us have a steady trend of driving improved operating margins at Topgolf, right? We were up 180 basis points year over year. And during all of last year, Kate, you heard us talking about implementing PI. We got PI fully implemented in Q4. That digital reservation system drives and allows us to improve overall operating efficiencies, and you're just continuing to see us realize the fruits of that labor, and it will continue. The labor model, same thing.
Katharine Amanda McShane: Sure I'll take the first one and then Brian.
Katharine Amanda McShane: Lateral.
Brian: Second part on capital allocation to U.
Brian: So you've seen us have a steady <unk>.
Katharine Amanda McShane: Trend of driving improved operating margins at top golf right, we were up 180 basis points year over year.
Brian: And during all of last year, Kate you heard about us talking about implementing pie, we got Pi fully implemented in Q4 that digital reservation system drives and allows us to improve overall operating efficiencies and you're just continuing to see us.
Brian: Realize the fruits of that labor and it will continue.
Brian: The labor model same thing we've had.
Unknown Executive: We've had an improved and revised labor model that was implemented fully at the end of last year, and you're continuing to see the benefit of that. Now, we also had a little bit of a shift in timing of some marketing spend, you know, moving it to where our new initiatives are going to be introduced, and therefore, it can be most impactful. And so there's a little bit of a timing move. So you're not necessarily going to see 180 basis points every quarter.
Brian: <unk> and revised labor model that implemented fully at the end of last year, and you're continuing to see the benefit of that.
Unknown Executive: Now, we also had a little bit of shift in timing of some marketing spend.
Unknown Executive: Moving it to where our.
Unknown Executive: New.
Unknown Executive: Initiatives are going to be.
Unknown Executive: <unk> introduced and therefore, it can be most impactful and so theres a little bit of a timing move.
Unknown Executive: So youre not going to see necessarily a 180 basis points every quarter, but we feel confident on our 35% EBITDA margin for the full year and what is really obvious and I think proven is the trend here of being able to consistently drive improved.
Unknown Executive: But we feel confident in our 35% EBITDA margin for the full year. And, you know, what is really obvious and I think proven is the trend here of being able to consistently drive improved venue margins and returns. You know, candidly, even in some tough environments, right, with same venue sales down 7% to deliver a 180 basis point improvement in margin performance, I think is a pretty good proof point. Brian, I'll send the capital one over to you. Sure. Thanks, Kate. I think in our call today,
Brian: Venue margins and returns.
Unknown Executive: Candidly, even in some tough environment right with same venue sales down 7% to to deliver 180 basis point improvement in margin performance I think is a pretty good proof point Brian.
Brian: Send that capital on over to you sure.
Brian: Thanks Kate.
Brian: Our call today highlights our capital allocation strategy, we've continued to build build the venues.
Brian P. Lynch: to build the venues. We're paying down $50 million of debt, and we repurchased a million shares of stock. And that's very consistent with our capital allocation policy, which is, first and foremost, reinvest in the business. We've seen great returns there, either through investing in technology to benefit our leading position in technology in the golf equipment space or the Topgolf venues, which have great returns, and they're returning 18% to 20%
Brian P. Lynch: We're paying down $50 million of debt and we repurchased 1 million shares of stock and Thats very consistent with our capital allocation policy, which is first and foremost reinvest in the business. We've seen great returns there either through investing in technology to benefit our leading position in technology in the golf equipment space or the top golf.
Brian P. Lynch: And use which have great returns and they're returning 80% to 20% <unk>.
Brian P. Lynch: So we'll continue to do that first and foremost. Beyond that, we do want to maintain reasonable leverage ratios, and we currently believe we have them.
Brian P. Lynch: So we will continue to do that first and foremost beyond that we do want to maintain reasonable leverage ratios.
Brian P. Lynch: We currently believe we have them at two two times on a REIT adjusted basis, we're very comfortable at that level, so given that youll see us balance.
Brian P. Lynch: At 2.2 times on a readjusted basis, we're very comfortable at that level. So given that, you'll see a balance really between returning capital to shareholders and paying down debt, both of which we announced today. And then after that, we'll look at other investments and acquisitions as they come up. You know, I've mentioned this before that the good thing is we don't have to do any. We have enough embedded growth where we don't have to go out and do anything to drive growth in our revenue or profits, but we'll be opportunistic. And so we'll take those opportunities as they come up.
Brian P. Lynch: It really between returning capital to shareholders and paying down debt, both of which we announced today and then after that.
Brian P. Lynch: We'll look at other investments.
Brian P. Lynch: Acquisitions as they come up.
Brian P. Lynch: And just before that.
Brian P. Lynch: The good thing is we don't have to do any we have enough embedded growth, where we don't have to go out and do any two to drive growth in our revenue our profit, but we'll be opportunistic.
Brian P. Lynch: And so we'll take those as they come up.
Speaker Change: Thank you.
Brian P. Lynch: And our next question will come from Joe Altobello with Raymond James. Please go ahead. Thanks.
Speaker Change: And our next question will come from Joe Ultra Bello with Raymond James. Please go ahead.
Joseph Nicholas Altobello: Thanks, guys, good afternoon. I guess the first question on the quarter is, you mentioned venue margins, marketing timing, and hedge gains. As drivers of the EBITDA upside in the quarter, it looks like you're about $21 million above the high end of the guidance, so maybe could you quantify for us the impact of the latter two, the OPEX timing and the hedging gains? Just try to get a sense of what the underlying beat was here.
Joseph Nicholas Altobello: Thanks, Hey, guys. Good afternoon, I guess, the first question on the quarter.
Joseph Nicholas Altobello: You mentioned that your margins marketing timing and hedge gains.
Joseph Nicholas Altobello: Drivers of the EBITDA upside in the quarter. It looks like you grew about 21 million above the high end of guidance. So maybe could you quantify for us the impact from the ladder to the Opex timing of the hedging gains just trying to get it.
Joseph Nicholas Altobello: What the underlying cause here.
Brian P. Lynch: Yeah, it's a little bit of all that, Joe. There were probably six, there were $6 million in incremental hedge gains, which somewhat hurts you for the balance of the year. But we had those in Q1. I'm not going to quantify the push in marketing expenses because it's not as easily identifiable. But there was some marketing that was planned early for Q1 at Topgolf, for example; they're going to push that out to align it more with the launch of these new consumer programs that Chip mentioned. So it's all that, and there's some over-performance. I mean, it was a really good quarter from that perspective.
Speaker Change: Yes, it's a little bit of all that Joe there was probably $6 $6 million incremental hedge gains, which somewhat hurts you for the balance of the year, but we had those in Q1.
Brian P. Lynch: Not going to quantify the push in marketing expenses, because it's not as easily identifiable, but there was some marketing that was planned early for Q1 of the top golf for example, they're going to push that out to align it more with the launch of these new consumer programs that chip mentioned.
Brian P. Lynch: So it's all of that and there is some over performance I mean it was.
Brian P. Lynch: Really good quarter from that perspective.
Joseph Nicholas Altobello: Okay, maybe in terms of the guidance, going back to an earlier question, you lowered the revenue outlook by $80 million, Jack FX driven basically, kept the EBITDA guidance unchanged. What are the offsets to that $80 million revenue reduction?
Brian P. Lynch: Okay.
Brian P. Lynch: Maybe in terms of the guidance went back to an earlier question.
Joseph Nicholas Altobello: Lower the revenue outlook 80 million, Jack FX, driven basically kept the EBITDA guidance on two things what are the offsets to that $80 million revenue reduction.
Brian P. Lynch: Well, it's some of the things I just said, it's improvement in the operational efficiencies of the other business, it's managing costs, it's overperformance in the other business.
Joseph Nicholas Altobello: Well, it's somewhat the things I just said.
Brian P. Lynch: The improvement in the operational efficiencies with other business.
Brian P. Lynch: Managing costs.
Brian P. Lynch: It is.
Brian P. Lynch: Over performance in the other businesses.
Brian P. Lynch: Okay, so it's all Q1 driven. Yeah, Joe, because we're hedged on the 35 million FX, right? So that is only a portion of that flow. So you're really looking at a revenue drop that will hit EBITDA of, you know, something over 45, but 50, 55. You know, we're able to offset that with our performance and the rest of the business. I'm just trying to get a sense of what the cushion is between 620 and 640, and it sounds like there's still a little bit of cushion there. So, thank you. I appreciate it.
Brian P. Lynch: Okay. So it's all Q1, driven yes, Joe because we're hedged on the 35 million FX rate. So that is only a portion of that flows youre really looking at a.
Brian P. Lynch: Revenue dropped it will hit EBITDA.
Brian P. Lynch: Some.
Brian P. Lynch: <unk> over $45 $50 55.
Brian P. Lynch: <unk>.
Brian P. Lynch: <unk>.
Brian P. Lynch: We're able to offset that.
Brian P. Lynch: Outperformance in the rest of the business.
Brian P. Lynch: Okay.
Brian P. Lynch: I'm just trying to get a sense of what the question isn't that 6.6, Borg and it sounds like Theres still a little bit of cushion there. So thank.
Speaker Change: Thank you.
Joseph Nicholas Altobello: And our next question will come from Casey Alexander with Compass Point Research and Trading. Please go ahead.
Brian P. Lynch: And our next question will come from Casey Alexander with Compass point Research and trading. Please go ahead.
Casey Jay Alexander: Yeah, hi, good afternoon. I'm trying to understand a little bit better about the Chrome Tour launch. Is that an 11% premium ball market share? Is that Chrome Tour and Chrome Soft combined, or to what extent is Chrome Tour cannibalizing Chrome Soft? Can you give us a little more granularity around that?
Casey Jay Alexander: Yes, hi, good afternoon, I'm trying to.
Casey Jay Alexander: Understand it a little bit better about the chrome tour launch.
Casey Jay Alexander: Is that.
Casey Jay Alexander: And 11%.
Casey Jay Alexander: Premium ball market share.
Casey Jay Alexander: Is that chrome tour and chrome soft combined or to what extent is chrome tour.
Casey Jay Alexander: Cannibalising chrome soft can you can you give us a little more granularity around that.
Unknown Executive: Sure, yeah, it is both of those combined, Casey, so it is, for all intents and purposes, your ethane ball market share, you know, and, you know, it's the premium price points of $50 and higher. We're $55 a dozen; the 11% is all of those products, which includes ChromeSoft, ChromeTour, and ChromeTourX. We previously had everything under Chrome Soft. So, Chrome Tour, absolutely. I guess it cannibalizes Chrome Soft, but they're different products now in terms of their compression ranges, consumer targets, etc. And, as you know, it's a significant launch for us, and we're excited about the direction of it.
Speaker Change: Sure Yes. It is both of those combined Casey. So it is for all intensive purposes urethane ball market share.
Unknown Executive: And.
Unknown Executive: It's the.
Unknown Executive: Premium price points $50 or higher.
Unknown Executive: There were $55 a dozen as our mat price.
Casey Jay Alexander: So that 11% share, what would that compare to last year when it was just Chrome Tour? I mean ChromeSoft.
Unknown Executive: <unk>.
Unknown Executive: The.
Unknown Executive: The 11% is all of those products, which includes chrome soft Chrome tour Chrome Tour X.
Casey Jay Alexander: We previously had everything under chrome soft.
Casey Jay Alexander: So.
Casey Jay Alexander: Chrome tour absolutely.
Casey Jay Alexander: I guess cannibalize chrome soft, but they are different products.
Casey Jay Alexander: Now in terms of their compression ranges consumer.
Casey Jay Alexander: Consumer targets et cetera.
Casey Jay Alexander: As you know, it's a significant launch for us and we're excited about the direction of it.
Casey Jay Alexander: But that 11% share what would that comp against last year. When it was just chrome tour chrome soft excuse me.
Unknown Executive: You know, it's probably in that, you know, 8 to 10 on a seasonal basis. So we're up nicely in the premium category and getting good feedback. And then we're up 120 basis points, I think, overall in the ball category year to date.
Casey Jay Alexander: It's probably in that.
Unknown Executive: Eight to 10 on a seasonal basis, so we're up.
Unknown Executive: Nicely in the premium category and getting good feedback and then were up.
Unknown Executive: 120.
Unknown Executive: 20 basis points I think overall in the ball category.
Unknown Executive: Year to date.
Unknown Executive: and Chrome.
Unknown Executive: And the CRO tour versus the chrome soft is a higher priced categories, so that might be driving some additional margin.
Unknown Executive: We raised our price this year from $50 a dozen to 55. We have traditionally priced at the high end, you know, and so not a change in strategy there. We just launched, you know, Chrome, a product previously launched two years ago. There is a price increase this year for us where we are taking prices with the Chrome Tour product. Great, thank you. And again, to ask a question, you may press star.
Unknown Executive: We raised our price this year from $50. It doesn't to 55, we have traditionally priced at the high end.
Unknown Executive: And.
Unknown Executive: So not a change in strategy there.
Unknown Executive: Launched.
Unknown Executive: The chrome product previously launched two years ago.
Speaker Change: Okay Alright.
Unknown Executive: There is a price increase this year for us where we are taking price.
Unknown Executive: With the.
Unknown Executive: Chrome tour product.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Operator: And again, to ask a question, you may press star, then 1. Our next question will come from Noah Zatzkin with KeyBank Capital Markets. Please go ahead. Thanks for taking my questions. You know, I think.
Unknown Executive: And again to ask a question you May Press Star then one.
Noah Seth Zatzkin: Our next question will come from Noah is that skin with Keybanc capital markets. Please go ahead.
Noah Seth Zatzkin: Alright, Thanks for taking my question.
Noah Seth Zatzkin: I think last quarter, when you kind of looked back on the second half of 2023.
Noah Seth Zatzkin: You called out events.
Noah Seth Zatzkin: And mid REIT traffic headwinds are you kind of touched on events, but.
Noah Seth Zatzkin: Just wondering if you could kind of provide an update on progress with the midweek traffic initiatives.
Noah Seth Zatzkin: And how that might be.
Noah Seth Zatzkin: Essentially offering.
Noah Seth Zatzkin: Some upside or tailwind to the comp in the back half, particularly.
Noah Seth Zatzkin: Yeah, hey, Noah. The, as you know, the primary areas of same venue sales challenge for us over the last several quarters have been midweek and events. We continue to do very well during peak times, and our peak times are basically weekends, but we also do very well on Tuesdays. And we have had a long-standing value offering on Tuesday that is very well accepted and understood. So the events business is stabilizing.
Operator: Sure.
Noah Seth Zatzkin: Yeah, Hey, Noah.
Operator: <unk>.
Noah Seth Zatzkin: As you identified the.
Noah Seth Zatzkin: The primary areas at the same venue sales challenge for us over the last.
Noah Seth Zatzkin: Several quarters had been.
Noah Seth Zatzkin: Mid week.
Noah Seth Zatzkin: And events, we continue to do very well during peak times and our peak times are basically weekends, but we also do very well on Tuesday, and we have had a longstanding val.
Noah Seth Zatzkin: <unk> offering on Tuesday that is very well accepted and understood.
Noah Seth Zatzkin: So the events business is stabilizing it's performing just as we would expect it to and hope it would.
Noah Seth Zatzkin: It's performing just as we would expect it to and hope it would. The midweek continues to be where we struggle from a same-venue sales perspective. We have identified the 3.30 as an initiative that will help us improve that, but that trend really has not changed over the last quarter.
Noah Seth Zatzkin: The midweek continues to be where we struggle from a same venue sales perspective.
Noah Seth Zatzkin: We have identified the three.
Noah Seth Zatzkin: <unk> is an initiative that will help us.
Noah Seth Zatzkin: Improve that.
Noah Seth Zatzkin: <unk>.
Noah Seth Zatzkin: But that trend really has not changed over the last quarter.
Noah Seth Zatzkin: Quarter.
Speaker Change: Thank you.
Unknown Executive: And this concludes our question and answer session. I'd like to turn the conference back over to Chip Brewer for any closing remarks.
Noah Seth Zatzkin: And this concludes our question and answer session I would like to turn the conference back over to chip Brewer for any closing remarks.
Unknown Executive: Well, on today's call, we got kind of granular, as we should have, and discussed a lot of specific details around quarters and some recent volatility. As I close, I'd like to take a moment and just kind of recap what I believe is the larger view.
Unknown Executive: Well.
Unknown Executive: On today's call, we got kind of granular as we should and discussed a lot of specific details around quarters in some recent volatility.
Unknown Executive: As I close that could take a moment and just kind of.
Unknown Executive: Recap what I believe is the larger view.
Unknown Executive: You know, first and foremost, our company continues to grow and strengthen. We have a strong track record of EBITDA growth, and one that we expect to continue. Last year, we transitioned to positive cash flow. That was a major goal of ours. That cash flow is now increasing, and our run rate, or embedded cash flow, is expected to ramp up over the next few years. That's an important transition and one I hope doesn't get lost in the daily noise.
Unknown Executive: First and foremost our company continues to grow and strengthen.
Unknown Executive: We have a strong track record of EBITDA growth and one that we expect to continue.
Unknown Executive: Last year, we transitioned to positive cash flow that was a major goal of ours.
Unknown Executive: That cash flow is now increasing and a run rate or embedded cash flow is expected to ramp over the next few years.
Unknown Executive: That's an important transition in what I hope doesn't get lost in the daylight noise.
Unknown Executive: Topgolf itself is transforming golf. It's increasing its venue profitability and returns and has a clear growth path ahead. And it also has an extremely strong defensive mode.
Unknown Executive: Top golf itself is transforming golf, it's increasing its venue profitability and returns and as a clear growth path ahead.
Unknown Executive: And it has also an extremely strong defensive mode.
Unknown Executive: The same venue sales have been somewhat volatile post-COVID, but we're working through that, and we're confident in our direction and expect to prove ourselves here over the not-too-distant future. Given Topgolf's reach and new and existing golfers, the synergies of Topgolf's audience and our products business are clear. We're in the early innings of delivering on the potential here.
Unknown Executive: At the same venue sales have been somewhat volatile post COVID-19, but we're working through that and we're confident in our direction and I expect to reprove ourselves here over the not too distant future.
Unknown Executive: Given top golfs reach in new and existing golfers the synergies of top golfs audience in our products business is clear.
Unknown Executive: We're in the early innings of delivering on the potential here.
Unknown Executive: And the Callaway brand also continues to strengthen. In Q1, we were the number one US brand in drivers, fairwood, and hybrid. And AI Smoke was the number one model and driver of Ferriwood and Irons, and Odyssey was the number one putter on the strength of AI1.
Unknown Executive: And the Callaway brand also continues to strengthen in Q1, where are the number one U S brand and drivers <unk> and hybrid <unk>.
Unknown Executive: And AI smoke was the number one model and driver Fairway Woods and Irons Odyssey was the number one potter on strength of AI, one we delivered U S market share growth in clubs and golf ball.
Unknown Executive: We delivered U.S. market share growth in clubs and golf balls and also a record new share in premium golf balls. We're in a healthy and growing industry, and we have robust plans for the second half of this year and expectations of revenue and profit growth for the year. Overall, we remain confident in our future and our ability to create value for shareholders as we believe growth with cash flow and a uniquely strong strategic position will deliver value to shareholders over time. Thank you for your time today, and we look forward to continuing to update you on our progress.
Unknown Executive: And also a record new share in premium golf ball.
Unknown Executive: We're in a healthy and growing industry and we have robust plans for the second half of this year and expectations of revenue and profit growth for the year.
Unknown Executive: Overall, we remain confident in our future and our ability to create value for shareholders. As we believe growth with cash flow in a uniquely strong strategic position will deliver value to shareholders over time.
Unknown Executive: Thank you for your time today, and we look forward to continuing to update you on our progress.
Unknown Executive: Yeah.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.