What is exciting is the belief that they can be LPGA viewers or on-site fans. After the merger, Callaway said its golf equipment will account for 30% of revenue and its apparel 24%, while Topgolf will represent 46% of revenue. The majority of Topgolfs revenue comes from physical locations, but they also have a growing technology business, which Callaway envisions being a significant source of revenue in the future. 3 Morning Consult Polling, Published July 21, 2020 With Athletic beers, you can have the full relaxing ritual of drinking a great beer to wind down the day, with your dinner, or day drinking, without derailing the rest of your day or week. 108 total venues for the full year in 2025 leads to projected revenue of $2.3 billion and $336 million of EBITDA. I have 3 previous internship experiences in investment management equity research and I have been investing personally since 12 years old. Based on Mondays closing price of $29.52 per share, Callaway paid $2.66 billion to acquire the rest of Topgolf beyond its existing ownership. Is this happening to you frequently? Kyle Arnold is the aviation writer for The Dallas Morning News, covering airlines, air travel and the aerospace industry. For more information please visit www.callawaygolf.com, www.odysseygolf.com, www.OGIO.com, www.travismathew.com, and www.jack-wolfskin.com. Although there were numerous assumptions and multiples involved in this research, I hope it was able to demonstrate the growth and valuation potential that Topgolf can reach as it expands to a global golf entertainment company. I am not receiving compensation for it (other than from Seeking Alpha). Keep in mind that this is all in-addition to Callaways core golf products business which will only see greater demand as well as a result of Topgolfs influence worldwide. Callaway is issuing about 90M shares to facilitate the merger stock is down about 20% in response. Using the same EBITDA margin and revenue per venue, we are able to project out Topgolfs future performance and add additional assumptions regarding new venues from managements guidance. What began as a technology that enhanced the game of golf now encompasses a range of unmatched experiences where communities can discover common ground. Chip Brewer will continue to lead the combined company as President and Chief Executive Officer. Therefore, adjusted revenue and EBITDA numbers for the full-year 2021 would be around $1.3 billion and $190 million. Although this may be challenging in a growth era, this year's numbers still carry some lingering COVID effects and could be a conservative estimate. Both companies are well positioned to take advantage of both short- and long-term changes in consumer behavior as a result of the pandemic. Topgolf currently has 28 open locations in the United States, with another dozen opening soon all over the place. Diluted earnings (loss) per share:. (1) Represents amortization expense of intangible assets from the acquisitions of OGIO, TravisMathew and Jack Wolfskin. The foregoing list is not exhaustive. 4 Based on 2022 projections Callaway already had an exclusive relationship with Topgolf, which put their clubs, merchandise, and apparel in every location worldwide, but you can expect Callaway penetrate that relationship even more. It is all about having great experiences and sharing it. The GAAP results contained in this press release have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The data on this page is also based on data sources collected from public and open data sources on the Internet and other locations, as well as proprietary data we licensed from other companies. If you do nothing, you will be auto-enrolled in our premium digital monthly subscription plan and retain complete access for 65 per month. Bottom line Topgolf has developed a unique way to engage an entire new generation of individuals that werent interested in golf before. We are the subject of inquiries from the capital market world and our investors would look at it as a way to grow the company and get liquidity. Topgolf now has 38 U.S. and three overseas venues where customers can hit chip-embedded balls at high-tech driving range targets in a lounge-like atmosphere, complete with DJs and drink specials. Accordingly, we have not provided a further reconciliation for long-term forecasted Adjusted EBITDAS to GAAP net income. People come back, it is a meaningful repeat business, he said. This valuation projection assumes that Callaway commits to and has the free cash flow available to invest in the future growth of Topgolf venues. All of us are looking forward to building new experiences, reaching new audiences and solidifying our digital infrastructure as we connect communities around the globe., In addition to Callaway, the current Topgolf ownership includes Providence Equity Partners, WestRiver Group and Dundon Capital Partners, which added: This is a natural combination that brings together two complementary businesses at the center of one of the most dynamic sports and entertainment experiences available today. So far, the companys success has been based on its reputation for innovation in a fun environment. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Topgolf is the leading tech-enabled golf entertainment business, with an innovative platform that comprises its groundbreaking open-air venues, revolutionary Toptracer technology and innovative media platform with a differentiated position in eSports. A recent survey conducted for Topgolf by the National Golf Foundation shows that 23 percent of new golfers started playing after their first Topgolf experience, while 75 percent of non-golfers said they were interested in playing on a traditional course after playing Topgolf. Through $750 million in acquisitions of premium apparel, footwear, and equipment brands like Jack Wolfskin, TravisMathew and Ogio, Callaway has desperately attempted to diversify their business and cater to a younger demographic which seems to be losing interest in golf or never picked it up in the first place. Stay informed and spot emerging risks and opportunities with independent global reporting, expert Its those numbers that have participant-hungry golf courses and the national golf associations all clamoring to draft off Topgolfs success. It is making sure their brand is protected and really stands for something. Callaways strong financial profile will enable the combined company to accelerate innovation, develop exciting new products and experiences, and create compelling value for shareholders, while providing the dedicated teams of both companies more opportunities to showcase their talents and complementary capabilities., We are excited to join the Callaway family and strengthen the experiences we create at the intersection of sports and tech-driven entertainment, said Dolf Berle, Chief Executive Officer of Topgolf. These selected companies were Dave & Buster's (PLAY), Live Nation (LYV), Drive Shack (DS), Cinemark (CNK), and Disney (DIS) who all have a component of in-person entertainment venues as a large part of their business. It is time and circumstance specific.. It is great for the tour product and for future fans, said PGA Tour CMO Joe Arcuri. After extensive research and analysis, Zippia's data science team found the following key financial metrics. The number of shares issued is also based upon a fixed price of Callaway common stock of $19.40 per share. Topgolf has done a wonderful job of running its business and creating an experience that is putting golf clubs in peoples hands.. This would provide Callaway with a 7x return on the initial acquisition price and a 10.13% CAGR. The high degree of interest in the game of golf as well as the past and future growth prospects of Topgolf makes Callaway one of the most intriguing investment opportunities. These risks, uncertainties and other factors relate to, among others: risks and uncertainties related to our pending merger with Topgolf, including the failure to obtain, or delays in obtaining, required regulatory approval, the risk that such approval may result in the imposition of conditions that could adversely affect Callaway or the expected benefits of the proposed transaction, any termination fee that may be payable by Callaway pursuant to the terms of the merger agreement, or the failure to satisfy any of the closing conditions to the proposed transaction on a timely basis or at all; costs, expenses or difficulties related to the merger with Topgolf, including the integration of the Topgolf business; failure to realize the expected benefits and synergies of the proposed transaction in the expected timeframes or at all; the potential impact of the announcement, pendency or consummation of the proposed transaction on relationships with Callaways and/or Topgolfs employees, customers, suppliers and other business partners; the risk of litigation or regulatory actions to Callaway and/or Topgolf; inability to retain key personnel; changes in legislation or government regulations affecting Callaway and/or Topgolf; uncertainty of the duration, scope and impact of COVID-19; a further spread or worsening of COVID-19; any further regulatory actions taken in response to COVID-19, including the future shutdown of or restrictions on Callaways or Topgolfs retail locations, venues, distribution centers, manufacturing plants or other facilities; the effectiveness of Callaways or Topgolfs protective gear, social distancing guidelines, and other preventive or safety measures; disruptions to business operations of Callaway and Topgolf as a result of COVID-19, including disruptions to business operations from travel restrictions, government-mandated or voluntary shut-down orders or quarantines, or voluntary social distancing that affects employees, customers and suppliers; continued growth, momentum and opportunities in the golf industry; production delays, closures of manufacturing facilities, retail locations, warehouses and supply and distribution chains; staffing shortages as a result of remote working requirements or otherwise; uncertainty regarding global economic conditions, particularly the uncertainty related to the duration and impact of the COVID-19 pandemic, and related decreases in customer demand and spending; and economic, financial, social or political conditions that could adversely affect Callaway, Topgolf or the proposed transaction. The company has a proven ability to innovate to expand its addressable market and capture the potential of games and content on its interconnected platform. Callaway announced the deal along with its third-quarter financial results, noting 12% year-over-year revenue growth to $476 million. Topgolf is merging with Callaway in a deal valued at $2 billion Topgolf charges include: Venue closure costs, a regulatory settlement reserve, the remeasurement of a contingent earnout obligation, and the remeasurement of a stock-warrant liability. Topgolf is expected to generate $1.06 billion in revenue and $158 million in EBITDA in 2021. On a percentage basis, over 95% of Topgolfs revenue is broken out evenly between gameplay, events, and food & beverage which is interesting considering a typical driving range might hardly make any money off food & beverage or events. This communication is for information purposes only and is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote in any jurisdiction pursuant to the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. The Callaway golf business, and the game of golf itself is experiencing unprecedented growth, Brewer said. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. During the course of the preparation of the Company's consolidated financial statements and related notes as of and for the three months ended September 30, 2020, the Company and its auditors may identify items that would require the Company to make material adjustments to the preliminary estimates presented above. Investors and stockholders will be able to obtain free copies of the proxy statement/prospectus/consent solicitation and other documents filed with the SEC by the parties through the website maintained by the SEC at www.sec.gov. While golf has struggled in recent years with courses closing across the country, the pandemic has actually been a boon as more corporate employees work from home, along with the outdoor atmosphere golfing provides. Both CEOs said golf equipment and golf entertainment venues have a chance to excel in the COVID-19 environment while other forms of entertainment have been severely restricted. However, once completed, management estimates that on average a typical venue generates $17 million in annual revenue and $5 million in adjusted EBITDA. Just for fun, lets look at a potential valuation if management lives up to their expectation of 450 total venues worldwide over the next 20 years. Callaways continued strong cash generation and ample liquidity, including more than $630 million of cash and available credit facilities as of Q3 2020, position the company to fund Topgolfs continued growth with significant ability to pay down debt at the same time. It is something that the game hasnt seen in a while.. On Tuesday, Callaway announced a definitive merger agreement which would see the Golf giant digest the remaining 86% of Topgolf they didnt already own at a ~$2 billion valuation. Topgolf contributed $336 million in revenue in Q4, which represented a 6 percent increase over the 2019 comp quarter. Become a business insider. 1 Golf Datatech industry report published September 21, 2020 With the completion of the 9 new venues in 2021, Topgolf will have 70 venues operating for the entirety of 2022. (4) Represents certain non-recurring costs, including costs associated with the acquisition of Jack Wolfskin. 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