Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total Company Q2 EBITDA of $206 million was ahead of expectations, driven by strong operating efficiencies and cost management.
- Topgolf's new venues are performing well and consistent with financial targets, achieving high financial returns.
- Callaway brand remains strong with growing market share positions in key categories such as drivers, fairway woods, and irons.
- TravisMathew continues to perform well, with solid quarter results, share gains at wholesale, and successful new retail store openings.
- The company has successfully reduced inventory by $193 million since Q2 last year, improving cash flow and financial position.
Negative Points
- Total revenue of $1.158 billion was below expectations, primarily due to lower than expected same venue sales at Topgolf.
- Topgolf same venue sales declined 8% in the quarter, driven by soft overall traffic trends.
- The company is lowering its full year revenue expectations by approximately $225 million due to weaker same venue sales and potential consumer activity slowdown.
- Topgolf's events business saw a significant decline, with same venue sales down 9% year over year and 27% on a two-year stack.
- Q2 consolidated revenues decreased 2% year over year, with golf equipment and active lifestyle segments also experiencing declines.
Q & A Highlights
Q: Does the current same venue sales trajectory make you think about pausing future unit growth beyond this year? Can you provide some color on traffic versus ticket for Topgolf in the quarter?
A: We believe the correct answer for creating shareholder value is to continue building venues, expecting to add an average of 10 per year starting in 2025. The recent same venue sales volatility is seen as temporary. Our new venues are performing well, delivering financial metrics consistent with our pro formas. The primary issue is traffic, not ticket spend.
Q: Can you elaborate on the Topgolf review that you've initiated and what strategic alternatives could be considered?
A: We are considering all alternatives, including a potential spin-off, to maximize long-term shareholder value. We are in the middle of this process and will report back once the work is complete.
Q: How are you addressing pricing concerns for Topgolf venues given the current consumer environment?
A: We are being selective and targeted in our promotional efforts. The "Free 30" promotion has been effective in driving traffic and smoothing demand. We are expanding this offering to attract new visitors who do not use the reservation model, while continuing to drive existing efforts via reservations.
Q: How do you view pricing within the golf equipment or lifestyle segments, both short-term and long-term?
A: The golf equipment consumer is wealthier and less sensitive to economic downturns. The markets remain solid globally, except for Korea. The Topgolf consumer has an average household income of about $100,000, making them more susceptible to inflationary pressures.
Q: Can you provide more details on the organic strategies being assessed to get Topgolf back to profitable same venue sales growth?
A: We are strengthening our team and capabilities to drive same venue sales. Initiatives include introducing new games, concerts, and digital marketing efforts. We are also investing in our digital and commercial teams and have hired a new Chief Operating Officer to enhance our efforts.
Q: How much better were the second two weeks of July compared to the first two weeks?
A: We saw a decline of 8% in June and 11% in July for U.S. same venue sales. Our guidance assumes these trends continue. We are not providing week-to-week specifics as there is too much noise to draw meaningful conclusions.
Q: What is the rationale behind the strategic review of Topgolf if the issues are seen as cyclical or temporary?
A: It is good practice to evaluate if there is an inorganic option that would be in the better interest of long-term shareholder value. The review is driven by frustration with stock performance, not the business fundamentals.
Q: Can you quantify the potential dissynergies for Topgolf if it were a standalone business?
A: This is something we will be looking at as part of the process, but we are not commenting on it at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
