Callaway renames its company Topgolf Callaway Brands Corp. to recognize the strength of the entertainment channel. / Photography: Shutterstock.
Chip Brewer, the CEO of Callaway Golf Co., sent a message earlier this month to skeptics of the company’s 2021 acquisition of entertainment concept Topgolf.
Speaking to analysts on the Carlsbad, Calif.-based company’s second quarter earnings call, Brewer highlighted Topgolf’s sales results. Same-store sales during the period were 8% higher than they were during the same period in 2019. The company is also on track to open more new locations this year than any other year. of its history, 11.
“While some investors initially viewed Topgolf’s business as risky or unproven,” Brewer said, according to a transcript on financial services site Sentieo, “I think the consistent streak of results since our merger should soon begin to change. outlook and valuations.”
Almost as if the company is doubling down on comments, Callaway this week announced plans to change its name to reflect how important the 76-unit Topgolf is becoming to its overall revenue and profits.
Callaway Golf Company will become Topgolf Callaway Brands Corp. The name change will take effect on September 6. The company’s ticker symbol on the New York Stock Exchange will change from ELY to MODG to “reflect the company’s leadership position in the modern golf ecosystem.”
“With this change, our new corporate identity will reinforce the opportunities rooted in our strong heritage business and, at the same time, raise awareness of our strategic shift into exciting new businesses in the modern golf and active lifestyle segments,” Brewer said in a statement. statement.
Topgolf was an intriguing, fast-growing restaurant and golf concept distinguished by its expansive, driving range-sized locations where patrons competed by throwing balls from distance or into target areas. He was considering an initial public offering before the pandemic changed things.
Callaway, which makes golf products, first invested in the chain in 2006 and held a 14% stake in the company when it agreed to acquire the remainder in late 2020 for a 2.5 valuation. billions of dollars. Still, it raised a few eyebrows given its rare combination of an amenities maker with a hospitality business.
For Callaway, the merger has given the company this “modern golf” concept, which moves the sport from vast green fields to more electronic and even indoor playgrounds as electronic golf games have grown in popularity. Topgolf had companies that sold tracking technology to driving ranges and also had a mobile golf game.
Topgolf is not only an important part of Callaway’s business, it is increasingly becoming the core of its business. Topgolf generated $403.7 million in revenue in the second quarter, up 24% from the prior period. The company said it generated a lot of revenue from corporate and social events. Operating profit nearly doubled to $44.2 million despite inflation concerns, which the company is offsetting with price increases, according to Brewer, that have no impact on traffic.
Brewer said Topgolf is on track to be the company’s largest segment by revenue, and is on track to represent more than half of the company’s overall EBITDA, or earnings before interest, taxes, depreciation and amortization, by 2025. According to the company, Topgolf is expected to represent approximately 44% of the company’s overall EBITDA. Much of this growth comes from new locations.
It operates 71 total locations in the United States, and franchisees or licensees operate five more outside the United States. Topgolf is building 11 more, and franchisees in Thailand and China plan to open units. Last year, Topgolf named former Pizza Hut chef Artie Starrs as CEO.
Apparently, operating a golf-centric entertainment concept is a bigger growth business than selling golf equipment.
“We believe Topgolf will be an important source of long-term value creation,” Brewer said.
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