Topgolf Callaway Brands (US:MODG)2023-05-09 16:00Revenue Performance - For the three months ended March 31, 2023, total net revenues increased by $127.2 million (12.2%) to $1,167.4 million compared to the same period in 2022, driven by growth in the Topgolf and Active Lifestyle segments [136]. - Topgolf segment revenues rose by $81.5 million (25.3%) to $403.5 million, attributed to strong performance at newly opened venues and increased same venue sales [136]. - Active Lifestyle segment revenues increased by $70.0 million (28.0%) to $320.2 million, reflecting continued strong brand momentum [136]. - Net revenues in the United States increased by $101.7 million (14.3%) to $811.1 million, driven by Topgolf and TravisMathew business growth [139]. - Net revenues in Europe rose by $18.7 million (13.9%) to $153.6 million, supported by strong performance from the Jack Wolfskin brand [140]. - Net revenues in Asia increased by $1.6 million (1.0%) to $160.2 million, largely offset by a $16.8 million unfavorable impact from foreign currency rates [141]. - The Rest of World segment saw net revenues increase by $5.2 million (13.9%) to $42.5 million, primarily due to strength in the Canada business [142]. Cost and Expense Analysis - Total costs and expenses for the three months ended March 31, 2023, increased by $141.0 million (14.9%) to $1,086.9 million compared to $945.9 million in the same period of 2022 [143]. - Cost of products rose by $30.2 million (7.3%) to $442.0 million, primarily due to increased sales volumes in Active Lifestyle driven by TravisMathew and Jack Wolfskin [144]. - Cost of services, excluding depreciation and amortization, increased by $5.4 million (13.8%) to $44.4 million, mainly due to the opening of 11 new company-operated Topgolf venues [145]. - Other venue expenses surged by $75.1 million (32.6%) to $305.5 million, attributed to the addition of new Topgolf venues and higher wages [146]. - Selling, general and administrative expenses increased by $25.4 million (10.4%) to $268.5 million, driven by higher employee costs and marketing expenses [147]. - Research and development expenses rose by $5.3 million (30.3%) to $22.8 million, primarily due to increased headcount [148]. Profitability and Income - Net income for the three months ended March 31, 2023, decreased to $25.0 million from $86.7 million in the same period of 2022, with diluted earnings per share dropping to $0.13 from $0.44 [154]. - Total operating income decreased by $13.8 million (14.6%) to $80.5 million, impacted by increased interest expenses and other costs [157]. - Golf Equipment segment net revenues decreased by $24.3 million (5.2%) and operating income decreased by $19.2 million (19.0%) due to retail fill-in in Q1 2022 and unfavorable foreign currency impacts [159]. - Active Lifestyle segment net revenues increased by $70.0 million (28.0%) and operating income increased by $10.6 million (39.7%), primarily due to a 27.2% increase in apparel sales [160]. Cash Flow and Financial Position - Cash and cash equivalents increased by $0.4 million to $180.6 million as of March 31, 2023, with cash provided by financing activities of $273.4 million [161]. - Consolidated net accounts receivable increased to $454.8 million from $167.3 million at December 31, 2022, reflecting seasonal increases in golf equipment sales [162]. - Inventory decreased by $29.4 million to $929.8 million as of March 31, 2023, but increased by $377.4 million compared to March 31, 2022, due to longer lead times and planned product launches [163]. - Total estimated capital expenditures for 2023 are expected to be approximately $270.0 million, with $190.0 million allocated for the Topgolf business [174]. - As of March 31, 2023, the company had $626.1 million in cash and availability under credit facilities, an increase of $50.5 million compared to March 31, 2022 [166]. - The company completed a refinancing plan on March 16, 2023, entering into a new $1,250.0 million secured Term Loan B maturing in 2030 [166]. Debt and Financial Risks - Significant cash obligations total $9,413.6 million as of March 31, 2023, with long-term debt obligations of $1,583.0 million [169]. - As of March 31, 2023, the estimated loss from foreign currency forward contracts was $96.4 million, based on a hypothetical unfavorable movement of 10% in foreign currencies [179]. - A sensitivity analysis indicated that a 10% increase in interest rates would result in an incremental expense of $2.4 million over the 12-month period ending March 31, 2023 [182]. - The company is exposed to inflationary pressures, which have contributed to increased product and operating costs, potentially affecting gross margins and cash flows [183].