Q4 2024 Topgolf Callaway Brands Corp Earnings Call
Good day and welcome to the top golf Galaxy brands fourth quarter 2024 conference call.
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Speaker Change: I would now like to turn the conference over to Katina much Dockers Investor Relations. Please go ahead.
Speaker Change: Good afternoon, and welcome to top golf Callaway brands fourth quarter earnings Conference call I'm Katrina, <unk>, Vice President of Investor Relations and corporate Communications joining me on today's call are chip Brewer, our president and Chief Executive Officer, Brian Lynch, Our Chief Financial Officer, and Chief Legal Officer, and Artie Starrs cheap Chief Executive officer of top off.
Speaker Change: Earlier today, the company issued a press release announcing its fourth quarter and full year 'twenty 'twenty four financial results our earnings presentation as well as our earnings press release are both available on our Investor Relations website under the financial results tab aside from revenue the financial numbers reported and discussed on today's call are non-GAAP measures. We identify these non-GAAP measures in the presentation and reconcile the measures to the.
Speaker Change: 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.
Speaker Change: Please review the Safe Harbor statements contained in the presentation and the press release for a more complete description, but that I would like to turn the call over to Mr. Berger. Thank you Katina and good afternoon, everyone and thank you for joining our call today.
Speaker Change: Starting on slide four Q4 was a strong quarter for our company as both our golf equipment business and Travis Matthew delivered year over year growth on the top and bottom line.
Speaker Change: And top golf delivered better than expected same venue sales on improving traffic trends as well as record Q4 venue level margins.
Speaker Change: For the full year golf equipment delivered another year of excellent brand performance, maintaining its leadership position in U S Golf club market share and driving record share in golf ball.
Speaker Change: Inactive lifestyle Travis Matthew delivered another strong brand and financial year, while the team at Jack will skin rightsize their business. So it is now positioned for profitability going forward.
Speaker Change: At top golf, despite type topline pressure, they delivered $337 million in EBIDTA and approximately <unk> 34 per cent venue level, EBITDAR margins, which were flat versus 2023, and up 500 basis points versus 2000.
Speaker Change: 19.
Top golf also impressively delivered over $100 million in free cash flow.
Speaker Change: Additionally, our total company free cash flow of $203 million was also above expectations. Thus further strengthening our financial position our point, Brian will cover in more detail during his comments.
Speaker Change: I view all of this is evidence of our enviable brand positions as well as the dedication of our employees, whom I would like to publicly thank for their commitment to our company.
Speaker Change: As we look forward to 2025, and our guidance on the product side of our business. We remain confident in the health of our golf equipment category.
Speaker Change: Our brand position in it and our 2025 product lineup.
Speaker Change: We expect the Travis Matthew brand to deliver year over year growth on both the top and bottom line and.
Jack: And Jack will skin to return to profitability.
Jack: At the same time, we are facing year over year headwinds from foreign exchange budgeting back target incentive compensation levels, which were not paid in 2024 and to a lesser extent tariffs.
Jack: As Youll see on slide five.
Jack: This will negatively impact our core business EBITDA by approximately $75 million year over year.
Jack: With foreign exchange alone impacting us by approximately $60 million on the top line and $40 million on the bottom.
Jack: This will unfortunately impact our financial results this year.
Jack: However, we expect to be able to mitigate a good portion of these headwinds via operational improvements.
Jack: And on an organic basis, thus normalizing for the foreign exchange incentive comp and tariff headwinds.
Jack: We anticipate our EBITDA to be up approximately 6%.
Jack: Driven by gross margin improvements and cost savings.
Jack: Looking further forward post separation with top golf, we see the opportunity for further cost savings as we anticipate scaling our corporate overhead back to a level more consistent with the size of the business without top golf.
Jack: We anticipate being able to grow our golf equipment revenues slightly faster than the golf market overall, consistent with our long term track record.
Jack: And we anticipate gross margin improvements from both initiatives. We are they have in place as well as from a potentially more stable foreign exchange environment.
Jack: We remain very optimistic about the future of this business.
Turning to slide six and our 2025 guidance for top golf.
Jack: The midpoint of our guide is approximately 270 million in EBITDA.
Jack: Same venue sales down mid single digits for the full year and 10% to 13% in Q1.
Jack: When you level EBITDA margins are anticipated to be approximately flat year over year, driven by the team's strong operational execution.
Jack: This contemplates headwinds of approximately $45 million due to a change in the reporting structure from a GOR in to a retail calendar.
Jack: The sale of World Golf tour that occurred in 2024 <unk>.
Jack: <unk> budgeting for full bonus and a small impact from foreign exchange.
Jack: After considering these headwinds we expect full year EBITDA to be down approximately $22 million year over year less than you would expect based on our normal flow through from the same venue sales due to the cost savings and operational efficiencies that are being implemented across the business.
Jack: I am pleased with the action top golf is taken to navigate a difficult operating environment.
Jack: Particularly with its delivery of strong venue level margins and free cash flow.
Jack: But I also recognize the need to drive same venue sales growth.
Jack: We believe the same venue sales performance is primarily a reflection of a macro consumer and category issue.
Jack: Having said this we are committed to improving same venue sales as quickly as possible as it is our number one focus for this business.
Jack: Along those lines and in anticipation of the separation of these businesses. Later this year, we've asked Artie Starrs top golf CEO to join US on this call.
Speaker Change: Aarti will give us more detail on top golfs performance and the initiatives in place to address same venue sales.
Speaker Change: As you can see on slide seven on a consolidated basis for 2025, we're guiding towards the midpoint of approximately $460 million in EBITDA and we once again expect to be free cash flow positive.
Speaker Change: On the strategic front, we are productively working towards the separation of top golf evaluating both the spin in the second half of this year and the potential sale.
Speaker Change: For this call there is nothing new to report on this process other than all options are still on the table and we're making steady progress.
Speaker Change: Let's now turn to segment level performance already will talk you through top golf and then I'll rejoin.
Speaker Change: To speak to golf equipment, and active lifestyle party over to you.
Speaker Change: Thanks Chip.
Speaker Change: Chip mentioned top golf generated over $100 million of free cash flow, marking our second consecutive year of positive cash generation.
Speaker Change: While same venue sales growth isn't where we would like it to be continued operational improvements and new venue development helped us deliver adjusted EBITDA of $337 million, which represents growth of 11% versus 2024.
Speaker Change: I'd like to share our performance for each of our key focus areas along with what to expect for 2025, starting with same day new sales.
Speaker Change: Same venue sales remained pressured in the fourth quarter down 8% with walk in or one and two bay down, 10% and our three plus day events down 5%.
Speaker Change: While sales were down we saw a sequential improvement driven by better traffic and better than expected holiday events with traffic up year over year for three plus Bay during November and December.
Speaker Change: A big thank you to our events team for delivering these results.
Speaker Change: While spend per visit drove most of the decline in same venue sales in Q4. This was driven by check management, including lower F&B spend from lower alcohol attachment.
Speaker Change: Chip mentioned, our Q1 2025 same venue sales trends have been softer than expected so far in part due to the fires and unusually severe cold weather.
Speaker Change: Approximately half of the business quarter to date has experienced what we would characterize as unfavorable weather year over year approximately a quarter has been neutral in the quarter has been favorable.
Speaker Change: Year to date same venue sales with favorable weather is up high single digits neutral weather are down low to mid single digits, but those seeing unfavorable weather are down high teens.
Speaker Change: Winter weather always causes volatility, but this year has been particularly negative versus prior year and the historical averages in our markets.
Speaker Change: In total our Q1 guide for down 10% to 13% incorporates approximately five point impact from the severe winter and the fires and one point from one less day in the quarter due to last years leap year.
Speaker Change: There is no doubt the macro environment for premium out of home Entertainment is currently facing headwinds. However, I am proud of how our teams are operating in this environment with a focus on the player in the NBA experience.
Speaker Change: Our key player experience metrics likelihood to return fund and price value are improving.
Year over year in the fourth quarter likelihood to return scores improved 100 basis points fund scores improved 160 basis points and value scores improved 240 basis points. This is a result of improvements we've made in the player experience with the launch of the sure thing Golf Club continued game innovation to.
Speaker Change: Provide new news and more reasons to visit.
Speaker Change: Simplification of our pricing and booking flow in our digital channels and continued focus on our teams delivering fun and world class hospitality to top golf.
Speaker Change: In 2024, our traffic trends improved throughout the year with Q4 seeing the best performance of the year.
Speaker Change: While we are encouraged by some of our leading indicators, it's clear we must make faster and bolder changes in how we go to market and we're doing just that spin.
Speaker Change: Specifically, new and relevant experiences for our players more compelling and accessible value and a streamlined corporate structure that better serves our venues.
Speaker Change: As it relates to new and relevant experiences we've executed on our strategy to bring more consistent new news and partner with Big brand names that have strong equity with our target demographics.
Speaker Change: We launched the Sonic the Hedgehog game in Q4, and we recently launched Captain America, Brave New World Top golf experience.
Speaker Change: <unk> are already amongst our most played.
Speaker Change: Going forward, you can expect large media and gaming properties to be a part of the top golf they experienced multiple times per year <unk>.
Speaker Change: Additionally, we now have a more disciplined and insight based approach for marketing calendar planning.
Speaker Change: On value, both actual price and price perception or an obstacle for many players.
Speaker Change: To tackle this in the fourth quarter, we tested removing booking fees and approximately 30% of the portfolio and it drove higher website conversion.
Speaker Change: We removed booking fees system wide in January while taking modest gameplay price.
Speaker Change: On events, we've given are in venue sales teams more tools and better processes to increase business development and that has resulted in increased lead conversion rates.
Speaker Change: Combining our efforts on value and new experiences, we're actioning against two large players segments, where we have existing equity and a clear right to win.
Speaker Change: Family outings and late night social occasions.
Speaker Change: We recently launched this with a more disruptive value offer in three multi venue markets. The offer is simple.
Speaker Change: $30 per hour of gameplay late night on Thursday, Friday, and Saturday, we call at TG nights, where we bring Djs into the venue late night. In addition to our late night bites menu.
As well as Sunday funding, which primarily targets families.
Speaker Change: In addition to owned internal media assets and paid digital and social we are testing linear television media in two of these markets.
Speaker Change: While only a couple of weeks in the sales and specifically traffic gains have exceeded our expectations and we are very optimistic.
Speaker Change: Though it is early.
Speaker Change: I am encouraged by the larger group sizes and strong F&B spend visit.
Speaker Change: Visit to date.
Areas, where our pricing model and experienced proposition have competitive advantages.
Speaker Change: In addition to our 120 minutes standard reservation. These model markets are pioneering our new 60 to 90 minute reservation products, which we believe will further support improvement in conversion rates on the web and the App.
Speaker Change: Our teams in these markets are extremely energized by the late night and Sunday traffic and we plan to roll out these changes across more venues in the coming weeks.
Speaker Change: More broadly we will continue to test new ways to connect with our players and increase their engagement with top golf.
Speaker Change: New and relevant experiences and improving our value perception will support traffic growth, but we also have initiatives that can drive growth in the bay.
Speaker Change: We're in the process of transitioning to a new point of sale system, which will not only be a win for our venue playmakers as it streamlines operations, but will also enable a better experience with NBA food and beverage ordering capabilities.
Speaker Change: Throughout the year, we'll be rolling out mobile <unk> capability, starting with payment at the end of Q1 reordering in the summer and a full new menu alongside point of sale rollout in Q4.
Speaker Change: We will continue to use our consumer data platform to build frequency with our existing players and to inform design of seasonal passes and loyalty programs.
Speaker Change: Moving onto our second key focus area margin growth, we had a strong end of the year for venue level profitability.
Speaker Change: Venues generated EBITDAR margins of approximately 36% a record for the fourth quarter and we saw EBITDAR margins for the full year of 34%. Despite seeing sales headwinds. This underscores the efficient operations. Our teams can deliver with player with improving player experience scores.
Speaker Change: And the efforts we have made to improve our labor model, which delivered approximately 100 basis points improvement year over year.
Speaker Change: In 2025, we will continue to advance margin initiatives, particularly on the labor side, which we expect will improve venue level profitability and allow for investment into profitable traffic driving value.
While we are wholly committed to driving a return to growth in same venue sales. We also believe we have a long term opportunity to grow our venue margins.
Speaker Change: Moving onto our third key focus area venue development, we had another strong cohort in 2024 opening six new top golf menus, and completing one big shots conversion.
Speaker Change: Our Q4 openings in Ridgeland, Mississippi in Burlingame, California, just outside of San Francisco validate the brand is relevant across the country.
Speaker Change: Overall, we have a portfolio of building designs that meet local needs and drive strong unit economics, and while we are pleased with our track record in venue development. It is clear our team and resources need to be primarily focused on driving same venue sales and continuing to increase flow through at our existing venues.
As previously communicated we will have five venues slated to open in $2025 four of which are planned to open in the fourth quarter.
Speaker Change: We continue to have high conviction in our white space opportunity, but believe we are making the right prioritization in the near term.
Speaker Change: Finally, I want to cover our home office support structure as we prepare for the separation we are in the process of reorganizing with three clear intentions.
Speaker Change: One optimized leadership focus around driving same venue sales growth to simplify work for a venue teams. So they can focus on continued improvements in the <unk> experience and three further lower our cost base.
Speaker Change: This work is well underway with the recent Onboarding of Aaron Chamberlain, our Chief operating officer, and Josh <unk>, Our senior Vice President of revenue management and player engagement.
Speaker Change: Both Aaron and Josh bring a wealth of experience in the casino and travel hotel industries with a focus on track record of driving profitable growth.
Speaker Change: While I'm excited about the leadership team I get to work with side by side, we know at the heart of the brand our venue playmakers and our venue directors of operations, who leave them.
Speaker Change: We are streamlining our home office structure to better support our venues and run a more agile organization.
Speaker Change: To summarize we have a robust and targeted set of initiatives to improve <unk> sales.
Speaker Change: Primarily focused against this.
Speaker Change: We expect same venue sales to improve throughout the year as laps get easier as we bring new news to the top golf experience along with targeted value and as we stabilize the events business, we've improved our talent and capability in key areas of focus in driving sales and continued margin expansion, while improving the player experience.
Speaker Change: <unk>.
Speaker Change: I'm really excited about the future of top golf is our teams are driving action against our key focus areas. We believe these will drive both top line growth and free cash flow.
Chip Brewer: Back to you chip.
Chip Brewer: Now I'll turn into golf equipment.
Chip Brewer: The sport of golf remained strong in 2024 rounds played grew 2% year over year, marking the fifth consecutive year, where rounds played a exceeded $500 million.
Chip Brewer: Furthermore, interest in the game and participation continued to increase with US on course golf participation up $1 5 million to $28 1 million. Additionally.
Chip Brewer: Additionally, U S sell through an industry golf shipments both grew low single digits as well.
Chip Brewer: Our golf equipment business performed exceptionally well from a brand perspective in 2024.
Chip Brewer: And our global revenues were up slightly on a currency neutral basis.
Chip Brewer: Our tour staff had multiple wins, including one woman's and two mens majors are club brand continue to lead in the technology and the innovation ratings and our golf ball brand showed continued improvement in its overall brand rating.
Chip Brewer: And the number of people that rated it as their favorite ball.
Chip Brewer: Our U S dollar market share place. This is the number one club brand for the third consecutive year and the ninth out of the last 10 years.
Chip Brewer: We were number one in total clubs drivers very woods and hybrids.
Chip Brewer: And AI smoke was the number one model and drivers fairway Woods and irons.
Chip Brewer: We also had a very successful year in putters, driven by our AI one product line.
Chip Brewer: In golf ball, we maintained our position as the number two golf ball on the back of a successful launch of our Chrome tour brand <unk>.
Chip Brewer: As you can see on slide eight we have a long term track record of steadily growing our share in this category.
Chip Brewer: Looking forward in January we announced some exciting new launches.
Chip Brewer: In golf clubs are new elite product line is our most complete lineup in memory, delivering new technology and outstanding performance from top to bottom.
Chip Brewer: Turning to powders during Q4, we launched our square to square product line, featuring a zero torque designed.
Chip Brewer: This product is sold through extremely well and is creating excitement in the marketplace.
Chip Brewer: On the ball side, we're launching new and improved versions of our Super soft in our ERC product lines. This year. As this is primarily an ion them or a year for us.
Chip Brewer: However, we're also adding a little energy to the Chrome tour lineup with the addition of our Triple Diamond offering a model that based on our testing delivers the fastest ball speeds of any tour ball on the market.
Chip Brewer: We are forecasting our golf equipment revenues to be down slightly year over year, primarily due to foreign exchange.
Chip Brewer: But also because all of the big four golf Oems are launching full new wood lineups this year.
Chip Brewer: Something that doesn't happen every year.
Chip Brewer: And because we have less new product planned for the second half of the year.
Chip Brewer: Operating income will also be down due to the lower revenues as well as the previously mentioned headwinds.
On an organic basis, thus, excluding the headwinds and the FX.
Chip Brewer: Operating margin would have been forecast to be up slightly.
Chip Brewer: Yes.
Chip Brewer: Switching gears to our third and final segment active lifestyle.
Chip Brewer: Market conditions in this segment were challenging during 2024 with continued softness in global apparel markets, but Travis Matthew had a strong Q4 and a good year overall for the full year sales were down a little primarily due to the lapping of the before mentioned 2023 corporate channel sell.
Chip Brewer: In.
Chip Brewer: Excluding this timing issue sales were up approximately 7%, thus outperforming the market overall.
Chip Brewer: Looking at categories. The brand continues to perform well in its core men's category.
Chip Brewer: And is also gaining momentum in key new categories, such as outerwear and womens.
Chip Brewer: For 2025, we are projecting operating conditions to be similar to 2024, but expecting the Travis Matthew brand to outperform the market and deliver growth on both the top and bottom line.
This is a profitable business with strong prospects.
Chip Brewer: Jack will skin performed roughly consistent with expectations in Q4.
Chip Brewer: For the full year the business was challenged due to lower sales in Europe, which were partially offset by continued strong performance in China.
Chip Brewer: During 2024, we rescale the cost base of this business while at the same time working on our European product market fit by refocusing on the brand's core products and positioning.
Chip Brewer: We are expecting revenues for 2025 to be down because of a right sizing efforts, but profitability to be up.
Chip Brewer: This business remains a small part of our overall company but.
Chip Brewer: But we believe we have it well positioned for profitability in 2025 and beyond.
Chip Brewer: Overall for 2025, we are expecting our active lifestyle category revenues to be down year over year due to foreign exchange as well as the lower revenue projections for Jack Wolfe skin.
Chip Brewer: But for operating income to be higher.
In conclusion, we closed 2024 on a strong note.
Chip Brewer: And as we enter 2025, we remain focused on executing our strategic initiatives, bringing exciting new products and programs to market and driving continued operating efficiencies.
Chip Brewer: In the near term. We're also navigating some short term headwinds which are impacting this year's outlook.
Chip Brewer: Given the strength of our brands and their market positions, our operational capabilities and our strong financial position. We are confident we will get past these short term headwinds and return to growth.
Chip Brewer: And as we execute on our strategy, we believe we will be able to deliver significant shareholder value.
Chip Brewer: Especially vis vis the current market value of our equity.
Chip Brewer: Thank you and Brian over to you.
Brian Lynch: Thank you chip and good afternoon, everyone.
Brian Lynch: Before jumping into our financial results for the quarter.
Brian Lynch: I want to note that our GAAP results were impacted by the $1 $45 billion.
Brian Lynch: Noncash accounting charge related to the impairment of the top golf goodwill and intangible assets.
Brian Lynch: You may recall that the implied negotiated price for the top golf merger was $198 7 billion.
Brian Lynch: Payable in common stock, but the purchase price for accounting purposes was impacted by the stock price increase.
Between signing and closing and as a result, we recorded a $3 1 billion purchase price.
Brian Lynch: Even though no additional shares were issued.
Brian Lynch: Following the impairment the remaining carrying value of the top golf assets on our books is $1 6 billion.
Brian Lynch: Importantly, this noncash charge does not impact our liquidity or operational flexibility.
Brian Lynch: Now turning to Q4 financial results.
Brian Lynch: Q4, consolidated revenues of $924 million increased 3% year over year.
This increase was largely driven by increased revenue and golf equipment with the active lifestyle segment up slightly and top golf revenue consistent with the prior year.
Brian Lynch: Q4, adjusted EBITDA of $101 million increased 45% driven by improved operating results across each segment.
Brian Lynch: Moving to segment performance.
Brian Lynch: Top golf Q4 revenue was approximately flat at $439 million.
Brian Lynch: Revenue from new venues opened since Q4 last year offset an 8% decrease in same venue sales.
Brian Lynch: At the same venue sales results included better than expected performance in both the three plus <unk> events business.
Brian Lynch: In the walk in one to two bed business.
Brian Lynch: Top golf Q4, operating income was $27 million up.
Brian Lynch: $4 million compared to the prior year.
Brian Lynch: While adjusted EBITDA increased 14% year over year to $84 million.
Brian Lynch: The adjusted EBITDA growth was driven primarily by improved venue level margins.
Brian Lynch: EBITDAR margins for the quarter exceeded expectations and represented a record high in Q4.
Brian Lynch: Moving to the golf equipment segment.
Brian Lynch: Revenue was up 13% to $225 million year over year.
Brian Lynch: This result was driven by the continued success of both of our golf clubs business.
Speaker Change: Chrome family of golf balls.
Speaker Change: As well as the successful launch of our new AI, one square to square Putters in Q4.
Speaker Change: The seasonal golf equipment operating loss of $3 million was $17 million improvement compared to the prior year, primarily due to increased sales volume.
Speaker Change: Interactive lifestyle segment, Q4 revenue increased 1% year over year.
Speaker Change: This increase was due to an increase in apparel sales primarily Travis Matthew.
Speaker Change: <unk> reported approximately flat year over year revenue and continues to perform well in China.
Operating income increased to $24 million.
Speaker Change: Compared to $20 million in the prior year, primarily driven by the increased revenue and cost savings initiatives that Jack <unk>, resulting from the recent right sizing of that business.
Speaker Change: Moving to balance sheet and liquidity on slide 16.
Speaker Change: Our available liquidity, which is comprised of cash on hand, and incremental borrowing capacity under our credit facilities continued to strengthen.
Speaker Change: As of December 31, 2024.
Speaker Change: Our available liquidity increased $54 million to $797 million due to better cash flow generation and as the company continues to manage working capital and capital expenditures.
Speaker Change: At year end, we had total net debt of $2 3 billion.
Speaker Change: Which prior usual practice excludes convertible debt of approximately $258 million.
Speaker Change: Third to $2 2 billion for the same time last year.
Speaker Change: This increase is attributable to increased venue financing debt related to new venues.
Speaker Change: Partially offset by a reduction in term loan debt, including our second quarter discretionary $15 million principal pay down of our term loan b.
Speaker Change: It is helpful to evaluate our net leverage position by excluding the venue financing debt associated with our top golf venues, which is akin to capitalized rent.
Speaker Change: With no additional principal or board repayment.
Speaker Change: In Q4, a REIT adjusted net debt was $818 million.
Speaker Change: Over $150 million lower versus last year.
Speaker Change: Our net debt leverage which excludes convertible debt was three nine times as of December 31, 2024, compared to three eight times in the prior year.
Speaker Change: This increase was primarily due to increased venue financing debt.
Speaker Change: Importantly, our venue financing adjusted net debt leverage ratio.
Speaker Change: Which burdens adjusted EBITDA with the venue financing interest payments.
Speaker Change: Which are akin to rent.
Speaker Change: Turning to one seven times versus one nine times in the prior year.
Speaker Change: We remain comfortable with these leverage levels.
Speaker Change: Our inventory balance decreased $37 million or 5% to approximately $757 million.
Speaker Change: At the end of Q4 2024.
Speaker Change: We are comfortable with the quality of our inventory.
Speaker Change: Shifting gears full year consolidated adjusted free cash flow was $203 million.
Speaker Change: Which was ahead of our previous guidance.
Speaker Change: This performance reflects better than expected earnings as well as cash generation during the fourth quarter.
Speaker Change: The timing of the receipt and payment of inventory.
Speaker Change: And continued management of capital expenditures and working capital.
Speaker Change: Gross capital expenditures for 2024 were $295 million and we received reimbursements of approximately $115 million from our financing partners.
Speaker Change: For net capital expenditures of approximately $180 million.
Speaker Change: With approximately $55 million relating to the non top golf business.
Speaker Change: And $125 million coming from top golf.
Speaker Change: Looking specifically at guidance for 2025 on presentation slides five through seven.
Speaker Change: You can see that there will be some significant headwinds previously described.
Speaker Change: For 2025, we expect revenue to be in the range of four to $4 85 billion representing.
Representing an approximate 3% decline year over year at the midpoint of guidance.
Speaker Change: When excluding the FX and other headwinds previously mentioned we.
Speaker Change: We expect full year 2025 organic revenue growth to be down slightly year over year.
Speaker Change: For the core business, we are projecting revenue to be in the range of $2 $2 $75 billion to $235 billion.
Speaker Change: Representing a 5% decline year over year at the midpoint.
Speaker Change: Excluding the FX and other headwinds organic revenue is projected to be down 2%.
Speaker Change: For <unk>, specifically, we expect 2025 revenue to be in the range of $1 75 billion.
Speaker Change: 183 5 billion.
Speaker Change: Representing a decline of 2% year over year at the midpoint.
Speaker Change: Excluding the headwinds the guidance would represent full year organic revenue growth of approximately 1% drew.
Speaker Change: Driven by new venues, partially offset by our same venue sales forecast of down mid single digits.
Speaker Change: Turning to profitability, we anticipate adjusted EBITDA for 2025 to be in the range of $415 million to $505 million.
Speaker Change: Representing a $128 million declined year over year at the midpoint.
Speaker Change: Excluding FX and the other headwinds.
Guidance represents full year organic adjusted EBITDA growth of minus 1%.
Speaker Change: We're projecting core business adjusted EBITDA in the range of $175 million to $205 million.
Speaker Change: Excluding the FX and other headwinds core business adjusted EBITDA is expected to grow by $14 million or 6%.
Speaker Change: We are projecting top golf adjusted EBITDA in the range of $240 million to $300 million.
Speaker Change: Excluding the headwinds top golf adjusted EBITDA is expected to decline by approximately $22 million.
Speaker Change: Later in organic basis.
Speaker Change: Now turning to Q1, specifically.
Speaker Change: For Q1, we are forecasting consolidated revenue of 1.0, $4 5 billion to.
Speaker Change: To 1.085 billion and adjusted EBITDA of $125 million to $145 million.
Speaker Change: Overall, we had a strong finish to 2024 will face some short term headwinds in 2025 as discussed earlier.
Speaker Change: This will be a reset year as we navigate these headwinds and pursue the separation of top golf.
Speaker Change: The important part is that our Callaway golf and Travis Matthew brands remained strong.
Speaker Change: <unk> business has successfully right sized its business and our liquidity.
Speaker Change: <unk> position remains solid.
Speaker Change: We believe this will position us well to navigate through 2025 headwinds.
Speaker Change: Return to sustainable growth execute on our strategic initiatives and create shareholder value.
Speaker Change: With that said I would now like to turn the call back over to the operator for Q&A.
Thank you we will now begin the question and answer session to ask a question.
Speaker Change: Then one on your Touchtone phone the ask that you. Please limit yourself to one question and a follow up.
If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: Any time Youre question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: The first question comes from Matthew Boss with Jpmorgan. Please go ahead.
Matthew Boss: Great. Thanks, then I appreciate all the color.
Speaker Change: No.
Speaker Change: Chip.
Speaker Change: Maybe rd.
Speaker Change: Could you elaborate on the same venue sales trends when the weather has been neutral at top golf, maybe just walk through the expected progression in 2025 are or what constraints do you see from returning to positive same venue sales in the back half of the year.
Speaker Change: Sure I'll take it thanks, Matt.
Speaker Change: So the sort of the neutral weather markets, which we characterize as.
Speaker Change: It's approximately the same year over year. They are currently running down too.
Speaker Change: Down-low mid single digits.
Speaker Change: So an improvement from what we had seen in Q4.
Speaker Change: And we obviously have easier laps balance of year. So when we set the guidance and we look at the base trends.
Speaker Change: We're comfortable with that.
Speaker Change: I'm pretty excited about what we're seeing in these model markets in terms of how the consumers responding to some of the value messaging that we have in place.
Speaker Change: Some of the traffic numbers, we're seeing are extremely exciting.
Speaker Change: But I think the base guidance that we put forward. Matt is really this is the trend of the business that are not that's not weather impacted and.
Speaker Change: We have a lot of conviction in that.
Speaker Change: The final thing I would add is that in Q4.
Speaker Change: Our team just did an extraordinary job improving player metrics and that's continued in Q1, so when I think about the base trends.
Improving player metrics and introducing some more value that's profitable in the market.
Speaker Change: Feel good about the guidance.
Speaker Change: Great.
Speaker Change: And then maybe chip on golf equipment could you speak to initial reception of the elite launch in clubs square to square and powders and just if you could elaborate on and drivers of the 2025 organic forecast in this segment.
Speaker Change: Sure.
Speaker Change: We're really proud of.
Speaker Change: <unk> product line and.
Speaker Change: I have just recently launched it out there and.
Speaker Change: Excited about the prospects for the year, we do have the <unk>.
Speaker Change: A bit more challenging year from a share perspective, because of the launch of all of the big four Oems This year, which is not something that happens every year.
Speaker Change: But.
Speaker Change: Very proud of our product line and optimistic.
Speaker Change: As.
Speaker Change: The year develops and as we get it into hitting days, we're hearing great performance feedback and we find that that's our time to shine.
Speaker Change: On the.
Speaker Change: Square to scare square product line, we launched that in Q4 zero torque design.
Speaker Change: And.
Speaker Change: <unk> done exceptionally well.
Speaker Change: A category that's hot in the golf market right now we think we have a.
Speaker Change: Better design and approach to it and.
Speaker Change: So clearly something that we see.
Speaker Change: As energy.
Speaker Change: Did that answer the question Matt.
Speaker Change: Yes, It does best of luck.
Speaker Change: Thank you.
Speaker Change: The next question comes from Alex Perry with Bank of America. Please go ahead.
Alex Perry: Hi, Thanks for taking my questions here.
Alex Perry: Just first the corporate events comp accelerated nicely in the quarter can you talk about the key drivers there were there any strategy changes that you think helped drive the acceleration in the corporate events comp and then.
Alex Perry: What is the outlook for corporate events versus walk in for 2025 are you continuing to see green shoots in on the corporate side. Thanks.
Alex Perry: Yes, thank you very much.
Speaker Change: The team is doing a great job in Q4, and I'll put it into two sort of two buckets. The first is.
Speaker Change: We gave a bit more flexibility.
Speaker Change: Events and corporate events by and large yourselves are sold locally.
Speaker Change: So you are competing with other local establishment.
Speaker Change: And we gave the teams a bit more flexibility in terms of product design length duration the menu.
Speaker Change: And pricing and that paid significant dividends.
The second thing I would say is we.
Speaker Change: We're a business that's got some nice scale now we're in most of the large DMA is and we're able to bubble up a lot of those learnings in the local market I'll provide one specific example, where we.
Speaker Change: We had a few venues that we're selling to a national retailer when their holiday parties.
Speaker Change: Very well and we had some other venues.
Speaker Change: We're getting some resistance and we were able to take those learnings into the into the home office for that national retailer and ended up tripling our sales with that group. So I'd say, it's a competitive advantage we have a top golf wear.
Speaker Change: At the local level, we've got Super energized teams and we've given them some more flexibility and then in the home office, we put in I think more rigorous and better structure and making sure that these learnings are getting getting into the right places at the right time.
Speaker Change: In terms of 2025.
Speaker Change: The guidance.
Speaker Change: We expect walk in to be a little bit better than events. This year. The weather has impacted both channels year to date.
Speaker Change: The one thing I will say.
Speaker Change: The holiday events still seem to be a real source of strength for us.
Speaker Change: And we expect that to continue in 2025.
Speaker Change: Very helpful. And then my follow up is on the.
Speaker Change: Core golf equipment business can you talk about the expectation for the core business to be down year over year is it mostly just a function of a tough year from a market share perspective given.
Speaker Change: Some of the competitive launches or is there anything to do with channel inventory levels I guess.
Speaker Change: What drives the core business down year over year and in 2025.
Speaker Change: It's mostly FX. So if you wanted to pick the one largest as we mentioned.
Speaker Change: In the core business, there is $60 million of headwind from FX alone.
Speaker Change: And then beyond that.
Speaker Change: If youre looking at the golf equipment, we talked about.
Speaker Change: <unk>.
Speaker Change: Launch cadence this year, where we have more of our big competitors launching than last year.
Speaker Change: And we're also have less launches planned of our own in the second half of the year.
Speaker Change: And in an active lifestyle.
Speaker Change: We've intentionally scaled back.
The Jack <unk> businesses, we've resize that business and restructured it for profitability going forward.
Speaker Change: Very helpful Best of luck going forward.
Speaker Change: Yes. Thank you.
Joe <unk>: The next question comes from Joe <unk> with Raymond James. Please go ahead.
Joe: Hey, guys good afternoon.
Joe: On the core business I guess I'll stay here for a second so if I can.
Joe: Just to step back and look at that two.
Joe: 2019.
Joe: In our core business did about $210 million of EBITDA.
Joe: Call It a billion of revenue.
Joe: And EBITDA guidance this year below that.
Joe: Roughly $600 million of incremental revenue, so I understand the FX headwind year over year, but has something changed structurally with that.
Joe: Cause profitability to come down from $10 million.
Joe: Six years.
Speaker Change: No Joe.
Joe: Nothing structural.
At all.
Joe: <unk> is again the primary driver of that and we will work through the FX over time, it's a lab.
Joe: <unk>.
Joe: Process, there, where we the markets don't.
Joe: <unk> taken up price to offset it in initially but they will over time.
Joe: We've worked through these <unk>.
Joe: Cycles in the past.
Joe: There are some other changes obviously throughout that the Travis Matthew business is now bigger the Jack <unk> business is smaller.
Joe: But.
Nothing structural.
Joe: And.
Joe: Again on an organic basis.
Joe: Just normalizing for FX in the one year period, and the FX would be more dramatic relative to 2019 significantly so.
Joe: We're still driving 6% improvement in EBITDAR on lower revenues so.
Structurally.
Joe: I think we're in good shape.
Joe: Ed.
Joe: And headwinds that we'll work through.
Joe: Just to follow up on that topped off free cash flow guidance 25, I apologize I missed it.
Joe: We didn't provide specific guidance Joe on.
Joe: Cash flow, but we gave you the elements of that in the.
Joe: Earnings deck, including the Capex and.
Joe: EBITDA, including VF Ci for each of the segments.
Joe: Thank you.
Speaker Change: Once again, if you have a question. Please press Star then one.
Speaker Change: The next question comes from Megan Clark with Morgan Stanley. Please go ahead.
Megan Clark: Hi, good evening, thanks, so much.
Speaker Change: I have a question for <unk> Rd, and then maybe a follow up for Chuck and Brian So.
Speaker Change: First question on R&D again, a lot of helpful detail on kind of the initiatives you're undertaking to improve the venue sale. So thank you for that and it's nice to hear that you've had some positive early learnings, but I guess, if you just take a step back and at the same venue sales have been negative for six quarters and you've talked about a lot of initiatives that you've been working on.
Speaker Change: With us over the last several quarters.
Speaker Change: You kind of take a step back from a high level can you just provide some perspective on.
Speaker Change: Really what's changing as you look to 2025 relative to the last several quarters and then maybe related to that when you think about to Matt's question earlier inflicting to positive same venue sales at some point in the future. How much do you really think is in your control versus needing a little bit of macro help I guess.
Speaker Change: Mentioned lower alcohol attach rates in the quarter I am not sure if that was new or not but is there anything you're seeing just in the macro that that suggest it could be kind of a tougher battle in 'twenty five.
Speaker Change: Yes, we'd certainly love to see the macros improve but we think we're going to.
Speaker Change: Gibson menu sales going even if that doesn't happen then what I would tell you versus last year.
Speaker Change: What's different number one the consumer environment is different than two how we're tackling it is different.
Speaker Change: Most notably if I look at the first half of last year. When we were applying some promotions and targeted value on maybe specific digital channels and specific sort of shoulder parts of the business. We grow we drove some incremental 80, a couple of points with the <unk> and the free play promotions, but this year.
Speaker Change: We're really providing value when our players can can truly use it.
Speaker Change: Which is Sunday in late late night, which is two <unk> equities for US we've done a bunch of research in terms of why players love top golf why they come to top golf, where do we have a competitive advantage. Those are two segments in two parts of the business, where we have base to sell and it's very profitable for us to provide the price point that we're targeting.
Speaker Change: The other thing is as the price points sharp.
Speaker Change: So how we price which is by the hour.
Speaker Change: Just saying 30 Bucks is in this environment for six people Thats five Bucks a player.
Speaker Change: And that is that's extraordinary value and the beauty of this for US If you take Sunday for example, Sunday is 15% of our business.
Speaker Change: Gameplay is half the business. So we're basically putting 7%, 7% to 8% of the business on a nice promotional value, but what we're seeing come out of it as larger group sizes.
Speaker Change: Strong it's early but in some respects stronger F&B spend so the groups they are coming there socializing, they're spending more.
Speaker Change: When they come and the traffic numbers are extremely encouraging.
Speaker Change: And in the sales as well.
Speaker Change: In terms of a couple of other things that I didn't get into much detail in my script on but at the beginning of Q2 because people come into the venue really gameplay is like the anchor price. If you want to think of it that way, that's where it kind of gets people in.
Speaker Change: We've done some.
Speaker Change: Some deep statistical work on how our F&B prices.
Speaker Change: Compare and how people are navigating the menu and we are rolling out a simplified menu with some targeted.
Speaker Change: Pricing moves inside the menu that we don't expect the player to see but we expect to yield some comp growth and higher margins and we saw sequential traffic improvement through most of last year and before the weather hit was continuing so I sort of feel like with this value construct with some of the F&B work, we're doing we've got a <unk>.
Speaker Change: Strong slate of new news to get people excited about coming to top golf.
Speaker Change: I'm very optimistic.
Speaker Change: Great. Thank you and then just a follow up for chip O'brien.
Speaker Change: I know you said no update on the spin, but just when you announced the spin I think the expectation was to get to.
Speaker Change: Three times or under leverage within 12 months of the spin.
Speaker Change: Since then just given kind of the headwinds you talked about your EBITDA expectations are lower so can you just update us on how we should be thinking about your expectations for pro forma leverage of that core business and can you still get to three times within 12 months.
Speaker Change: Sure Megan we're again, we're not giving specific guidance, but we're very pleased with the way. We finished Q4 with our cash flow.
Speaker Change: Very strong.
Speaker Change: We expect to be cash flow positive for the total company and top golf in 2025.
Speaker Change: And the spin situation, we would use our intention is to have our retained stake that we would use to help us delever.
Speaker Change: So we feel very good about where we are now and where we are.
Got it.
Speaker Change: Yes, Megan I'll, just add that as a board and a management team, we're going to ensure that both businesses are in strong financial and strategic positions.
Speaker Change: At the time of separation there are a lot of different paths for that.
Speaker Change: And that's a commitment of ours.
Speaker Change: Okay. Thank you.
Chip Brewer: This concludes the question and answer session I would like to turn the conference back over to chip for any closing remarks. Please go ahead.
Chip Brewer: I would just thank everybody for.
Chip Brewer: Tuning in today on the call. We appreciate your time and we look forward to continuing to keep you updated as the opportunities present.
Chip Brewer: They may call if not before thank you so much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Chip Brewer: [music].
Chip Brewer: Okay.
Chip Brewer: [music].
Chip Brewer: Yes.
Chip Brewer: [music].
Chip Brewer: Yes.
Chip Brewer: Yeah.