Callaway Golf (ELY) Q2 2021 Earnings Call Transcript

Callaway Golf (MODG 1.20%)
Q2 2021 Earnings Call
Aug 09, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Callaway Golf Company's second-quarter 2021 earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to Patrick Burke, head of investor relations.

Thank you. Please go ahead.

Patrick Burke -- Head of Investor Relations

Thank you, Erica, and good afternoon, everyone. Welcome to Callaway's second-quarter 2021 earnings conference call. I'm Patrick Burke, the company's head of investor relations. Joining me as speakers on today's call are Chip Brewer, our president and chief executive officer; and Brian Lynch, our chief financial officer.

Artie Starrs, Topgolf's CEO; William Davenport, Topgolf's CFO; and Jennifer Thomas, Callaway's chief accounting officer, are also in the room today for Q&A. Earlier today, the company issued a press release announcing its second-quarter 2021 financial results. A copy of the press release and associated presentation are available on the Investor Relations section of the company's website. Most of the financial numbers reported and discussed on today's call are based on U.S.

generally accepted accounting principles. In the few instances where we report non-GAAP measures, we have reconciled the non-GAAP measures to the corresponding GAAP measures at the back of the presentation 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. We encourage you to review the safe harbor statements contained in the presentation and the press release for a more complete description.

Please note, in connection with our prepared remarks, there is an accompanying PowerPoint presentation that may make it easier for you to follow the call today. This earnings presentation is available for download on the Callaway investor website under the Webcasts and Presentations tab. Also in the same tab, you can choose to join the webcast to listen to the call and view the slides. As a webcast participant, you are able to flip through the slides.

I would now like to turn the call over to Chip.

Chip Brewer -- President and Chief Executive Officer

Thank you, Patrick. Good afternoon and thank you, everybody, for joining us today. Results for the second quarter were nothing short of outstanding, and I'm extremely proud of our entire global team for the work they have put in to build this business to the powerhouse that it is today. Let me start by thanking them for their ongoing focus and dedication as we navigate these extraordinary times, move the needle on our growth initiatives and capitalize on the tremendous market opportunity ahead of us.

As you will hear throughout the call today, we are experiencing strong momentum across all of our business segments and are delivering exceptional operating results despite a challenging environment. Revenue for the quarter was up 208% to $914 million and up over 112% to approximately $1.6 billion for the first half of 2021, both new records for our business. Profitability also reached new highs, with adjusted EBITDA of $164 million for the quarter and $292 million for the first six months of the year.While headwinds from COVID persist, we have strong conviction in both the long-term strategic position and impressive earnings growth prospects of this unique business. Before shifting gears to talk specifically about each area of our business, I want to give a personal shout-out to our tour team who's having an exceptional year as well.

Congrats to Phil and John for their wins at the PGA Championship in the U.S. Open earlier this season; to Xander for his gold medal performance in Tokyo; and to Annika for her dominant victory at the U.S. Senior Women's Open. What a summer for Callaway Golf's tour staff.

I can't tell you how excited I get seeing our players representing Callaway, along with our other brands, including TravisMathew and Topgolf, on the game's biggest stages. From a business perspective, I'm confident this exposure is very good for our brands and will help us deliver long-term shareholder value. Looking first at our golf equipment business. Demand for clubs and balls remains very high as the sport continues to gain interest from both new entrants, which are driving continued unprecedented growth in package sets, junior clubs, and women's clubs, along with core golfers who are playing more than ever and showing strong enthusiasm for the game.

According to Golf Datatech, rounds played in June remained at an all-time high, and retail demand remains elevated. Datatech's hardgoods sell-through in Q2 was up an impressive 40% versus 2019, and retail inventory levels remain extremely low, with only 2.2 months on hand at the end of June as industry supply chain strained to keep up with the last 12 months of unprecedented demand. More anecdotally, private club memberships are also experiencing exceptional demand, with waitlist developing at many clubs across the U.S. and the U.K.

With more options for activities opened this spring and summer compared to last year, we were cautious that there could have been a potential slowdown in golf participation and/or demand. However, thus far, we're pleased to report that we're not seeing this from our seat in the market. We are also monitoring supply chain disruption due to the resurgence of the coronavirus Delta variant. The resurgence has not had any negative demand implications yet, but it has caused further supply disruptions from factories based in and around Southeast Asia, primarily Vietnam.

The safety of the people working in these regions is top priority, and we're working with suppliers to make sure operating conditions are and remain as safe as possible. Also, we have become accustomed to adapting to these circumstances over the last 18 months, and thus, we're able to shift some portion of our production to other less-impacted factories. Still, given how lean inventories are already, the fact that nearly all our factories are running at 100% capacity, and that we'll need to shift production shortly toward next year's launches to protect that supply, these shutdowns will have an estimated $55 million negative impact on second-half revenues, primarily in our golf equipment segment and primarily in Q3. Although disappointing, I view this disruption as a short-term issue, not one that will have a long-term impact on value for strategy.

On the positive side, and I recognize this is a glass-half-full view, we now believe field inventory levels will almost certainly stay lower than expected through this year, in many ways, a healthy market dynamic that bodes well for 2022. All in all, we are very pleased with the strength of this category and our position in it. We expect to deliver record performance for our golf equipment segment this year, and perhaps most importantly, we continue to believe the outlook for the golf equipment category is highly positive, with both a larger total market and a higher embedded growth rate. Turning now to our apparel and soft goods segment.

The business put up another strong quarter, exceeding our expectations as retail locations reopened across the world and our brands remain top of mind for consumers. Starting with TravisMathew. This business strongly overperformed during the quarter and continues to see incredible growth as we move into the back half of the year. To contextualize, year over year for the second quarter, we saw more than 30% comp store growth in our own retail stores versus 2019, the last period of unaffected by COVID as well as strong growth in sell-through at wholesale accounts and e-commerce.

Another fun fact is that we are not just seeing brand momentum in the target male audience buying for themselves, as approximately 30% of the direct-to-consumer sales that we track are her buying for him. I'm no expert here, but when women are picking the brand for their men, I think it's a very good sign. Jack Wolfskin was a strong performer as well this quarter. The business has faced additional challenges given the longer COVID shutdowns in Europe than here in the U.S., but the team has worked through the issues brilliantly and is on track for a strong year.

As our owned stores in Europe reopened during the quarter, retail picked up nicely, almost reaching 2019 levels of revenue. Most importantly, we experienced strong sell-through of the spring/summer 2021 line, as well as strong, prebooks for the spring/summer '22 line, two very important indicators for the health of the brand. Our stores in China also continued to perform well as the brand maintains strong awareness and positioning within the outdoor apparel market there. The team at Jack Wolfskin has done a fantastic job of revitalizing this business and putting us in a strong position to grow on the top and bottom line as COVID restrictions abate in the brand's key markets of Europe and China and as the brand grows and strengthen appeal.

Lastly, our Callaway-branded soft goods business showed strength as well, particularly in Japan, as popularity for the sport drove consumer spending. Additionally, toward the end of the quarter, we took back the Korea apparel business, which was being licensed to a third party for several years. Although that business is just starting up, we are very excited about the long-term opportunity it will provide to our soft goods segment, and the team did an excellent job managing this transition given the COVID travel restrictions and challenges. With demand levels high across this business segment, we expect to enter 2022 with low retail inventory across all of our soft good brands.

In summary, we are fortunate to be in excellent categories and are on our path to deliver a good 2021 in this segment as well as future growth. Now on to Topgolf. Q2 marked the first full quarter of Callaway results with Topgolf included in our numbers, and they delivered beyond our expectations. While COVID concerns remain a challenging variable for venue operations, the team put up outstanding numbers even as other options for consumers became available.

We continue to be invigorated by the momentum of this business brought to both Callaway's portfolio and to the game of golf. Same venue sales percentage versus 2019 levels continued encouraging trend of recovery, with Q2 results in the low 90s, up substantially from the low 80s in Q1 of this year. Results were driven by a mix of strong walk-in sales and continued recovery in the event business. Looking forward, and this assumes no major restrictions from COVID upticks, we feel same venue sales for Q3 will be above Q2 results, while we expect Q4 sales to be slightly slower than Q2 due to the corporate events mixed in that quarter and that the full year should end at approximately 90%.

To put this in context, this is considerably above our expectations for the year and, we believe, a strong performance. Domestic venue expansion continued as planned during the quarter, with four new venues opening. Another venue, Holtsville, Long Island, opened recently, and yet another, Colorado Springs will open later this week. We then expect to open one more venue in Q4 for a total of nine new domestic venues this year.

At the end of the year, we will have 67 domestic venues in operation across three owned UPA venues for a total of 70 owned venues in operation. Internationally, our U.K. venues had an excellent quarter as they reopened strongly after COVID induced shutdowns in Q1, and our franchise international venue business continues to build capability and momentum despite various COVID challenges. Overall, the venue business is very healthy, with profitability exceeding our expectations.

The Toptracer business had a successful quarter as well, with over 2,000 bays installed in Q2, setting a new record as we continue to see strong demand and excellent customer feedback. While some challenges remain on the installation front due to COVID, we expect to meet or exceed our target of 8,000 new bays for the year. One of the highlights for the quarter was the successful installation of Toptracer into what we believe is the world's largest driving range, Golf Club Daiju located outside Nagoya in Central Japan. And more recently, we're thrilled to announce a partnership with St Andrews Links, the Home of Golf, in St.

Andrews, Scotland. Lastly, Topgolf's unique position in the market as a gateway to golf is continuing to introduce new players in the sport, and we see excellent long-term potential through our preferential ability to market to these new entrants and drive synergies across a growing consumer base, both on and off course. Looking ahead to the second half of the year and beyond, I remain excited about the opportunity ahead of us. We operate in great categories with a unique portfolio of businesses that are all exceeding our expectations.

There are, of course, macroeconomic hurdles that we and many companies are facing, including supply chain constraints, freight costs, staffing challenges, and inflationary pressure, but at the demand level, we are experiencing and expect to experience in the foreseeable future we see these as manageable and expect to still deliver excellent financial results. On the supply chain side, our guidance assumes an estimated $55 million negative impact to our top-line growth, primarily in Q3, to account for current disruptions. On the inflationary side, we have already started taking some price and believe we'll largely have the ability to take price as needed. Given the various moving parts for the remainder of the year, we are providing both third quarter and full-year guidance.

I'll let Brian discuss the numbers in more detail, but the headline is that we expect our full-year 2021 sales to be over $1.3 billion higher than 2019 and adjusted EBITDA to be between $134 million and $149 million higher than 2019. Our EBITDA for 2021 will be very close to the number we guided to for 2022 when we provided longer-term guidance in the fall of last year. We are essentially a year ahead of plan. And with that, I'll turn it over to you, Brian.

Brian Lynch -- Chief Financial Officer

Thank you, Chip. As Chip mentioned, we are very pleased with our second quarter and first-half results. Each of our operating segments performed above our expectations, leading to record results despite a challenging operating environment. There are some continuing challenges from the pandemic that will have effect on our business in the short term, including supply chain constraints, increased freight costs, staffing challenges, and inflationary pressures.

However, we believe that current demand levels, along with actions we can take, will mitigate the impact of these factors, and we expect to have strong financial results for the year and the foreseeable future. We are energized by the opportunities ahead of us, and we believe we are well situated to handle the prolonged pandemic. More specifically, each of our operating segments support an outdoor, active and healthy way of life that is compatible with the world of social distancing, and we have a strong liquidity position. As of June 30, 2021, our available liquidity, which is comprised of cash on hand and availability under our credit facilities, was $877 million, compared to $483 million at June 30, 2020.

In evaluating our results for the second quarter and first half, you should keep in mind the following: First, our non-GAAP results exclude non-cash amortization expense of intangible assets acquired in acquisitions, including fair value adjustments to Topgolf's leases and debt; noncash depreciation expense from the fair value step-up of Topgolf assets; transaction and transition costs from the acquisitions; noncash amortization of the debt discount on the notes issued during the second quarter of 2020; the $174 million pre-tax non-cash impairment charge in the second quarter of 2020 related to the Jack Wolfskin goodwill and trade name; a $253 million non-cash gain related to the write-up of our premerger Topgolf investment; a $33 million benefit in the second quarter of 2021 from the reversal of a portion of the noncash valuation allowance related to certain of our deferred tax assets and certain other nonrecurring items. We have provided in the tables to this release a reconciliation detailing the impact of these items on second quarter and first-half GAAP results. Second, this is a reminder that our first-half financial results include Topgolf for four months only as the merger was completed on March 8, 2021. With those factors in mind, I will now discuss our financial results.

Looking at Slides 10 and 11. Following record revenues in the first quarter, our revenues continued to be very strong in the second quarter of 2021, setting another record for the company. The second-quarter 2021 revenues benefited from incremental revenue from the Topgolf merger, and second-quarter 2020 revenues were significantly impacted as much of the company's business in golf retail will shut down then due to the pandemic. During the second quarter of 2021, sales in all product segments and in all major regions increased compared to both 2020 and 2019.

With that said, consolidated second quarter 2020 revenues were $914 million, compared to $297 million for the same period in 2020, an increase of $617 million or 208%. This increase was led by a 98% increase in the golf equipment and soft goods businesses as well as an incremental $325 million from the Topgolf business. Changes in foreign currency rates had an $18 million favorable impact on second-quarter 2021 revenues. Consolidated second-quarter 2020 revenues also increased $467 million or 105% compared to the same period in 2019, including a 37% increase in golf equipment and 21% increase in our soft goods business.

As a result, consolidated revenue for the first half of 2021 increased $826 million or 112% compared to 2020 and increased $602 million or 63% compared to the same period in 2019. Total cost and expenses were $806 million in the second quarter of 2021, compared to $474 million in the second quarter of 2020. On a non-GAAP basis, which excludes, among other things, the $174 million non-cash impairment charge in the second quarter of 2020, our total costs and expenses increased $503 million to $796 million for the second quarter of 2021, compared to $293 million in the second quarter of 2020. Topgolf added $301 million of total costs and expenses.

The remainder includes increased variable expense, the restoration of some expenses that were reduced during the pandemic in 2020, planned investment in the business, increased corporate costs to support a larger organization, and increased freight and inflationary pressures, including labor and commodity prices. To date, the overperformance of the company's business has generally allowed us to outpace the cost increases. We are also reporting for the second quarter of 2021 operating income of $107 million, an increase of $285 million, compared to a loss of $177 million for the same period in 2020. On a non-GAAP basis, which excludes the impairment charge in 2020, operating income for the second quarter of 2021 was $118 million, a $114 million increase, compared to $4 million for the same period in 2020.

The increase in second-quarter non-GAAP operating income was led by a $96 million increase in segment operating income from our golf equipment and soft goods businesses as well as an incremental $24 million from the Topgolf business. Non-GAAP operating income for the first half of 2021 increased $167 million to $215 million, compared to $47 million for the first half of 2020. Other expense was $31 million in the second quarter of 2021, compared to other income of $2 million in the same period of the prior year. On a non-GAAP basis, other expense was $27 million in the second quarter of 2021, compared to other income of $3 million for the comparable period in 2020.

The $30 million decrease was primarily related to $14 million of higher interest expense related to the Topgolf business in the second quarter of 2021 and an $11 million gain from the settlement of a cross-currency swap arrangement in the second quarter of 2020. Non-GAAP other expense for the first half of 2021, which excludes, among other things, the $253 million non-cash gain related to the write-up of the company's premerger investment in Topgolf, was $33 million of expense, compared to $1 million of income in the first half of 2020. Earnings per share was $0.47 on approximately 194 million shares in the second quarter of 2021, compared to a loss per share of $1.78 on approximately 94 million shares in the second quarter of 2020. Non-GAAP earnings per share was $0.36 in the second quarter of 2021, compared to earnings per share of $0.06 for the second quarter of 2020.

Non-GAAP fully diluted shares were 194 million in the second quarter of 2021, compared to 95 million shares for the same period in 2020. The share increase is primarily related to the issuance of additional shares in connection with the Topgolf merger. Full-year estimated diluted shares is approximately 178 million shares, which includes the weighted average shares issued in connection with the merger over approximately a 10-month period. As of June 2021, we had approximately 186 million shares that were issued and outstanding.

Adjusted EBITDA was $164 million in the second quarter of 2021 compared to $29 million in the second quarter of 2020 and $66 million in the second quarter of 2019. Topgolf contributed adjusted EBITDA of $57 million. For the first half of 2021, adjusted EBITDA was $292 million compared to $89 million in the first half of 2020 and $159 million in the first half of 2019. Topgolf contributed adjusted EBITDA of $17 million for the four months.

Turning now to Slide 12. I will now cover certain key balance sheet and other items. As of June 30, 2021, available liquidity, which represents availability under our credit facilities, plus cash on hand, was $877 million compared to $483 million at the end of the second quarter of 2020. This additional liquidity reflects overperformance in all of our business segments and improved liquidity from working capital.

At June 30, 2021, we had total net debt of $1.1 billion, including $652 million of Topgolf-related net debt. The Topgolf debt includes demand -- I mean, deemed landlord financing of $263 million related to financing of its venue businesses. Our leverage ratios have improved significantly period over period, and on a funded debt basis, are now under three times. Our consolidated net accounts receivable was $325 million, an increase of 52% compared to $214 million at the end of the second quarter of 2020.

The legacy business sales outstanding decreased to 58 days on June 30, 2020, compared to 79 days as of June 30, 2020. The increase in net accounts receivable is primarily attributable to the increase in second-quarter revenue but also includes an incremental $9 million of Topgolf accounts receivable. We continue to remain very comfortable with the overall quality of our accounts receivable at this time. Also displayed on Slide 12, our inventory balance decreased by 12% to $335 million at the end of the second quarter of 2021 compared to $379 million at the end of the second quarter of the prior year.

This $44 million decrease was due to the high demand we were experiencing in the golf equipment business and better-than-expected performance in our soft goods business. Topgolf added approximately $14 million of inventory this quarter. Capital expenditures for the first six months of 2021 were $96 million, net of expected REIT reimbursements. This includes $66 million related to Topgolf.

From the full-year 2021 forecast perspective, the golf equipment and soft goods business forecast is $65 million, consistent with our previous forecast. The 2021 full-year forecast for Callaway and Topgolf is approximately $243 million, net of reimbursements, primarily related to the new venue openings. The foregoing does not include approximately $33 million in capital expenditures for Topgolf in January and February premerger. Depreciation and amortization expense was $43 million in the second quarter of 2021.

Non-GAAP depreciation and amortization expense was $36 million in the second quarter of 2021, compared to $8 million in 2020. This includes $27 million of non-GAAP depreciation and amortization related to Topgolf. For the full year in 2021, we expect non-GAAP depreciation and amortization expense to be approximately $133 million, which includes $95 million for the Topgolf business. The foregoing does not include approximately $18 million of Topgolf non-GAAP depreciation and amortization for January and February in the aggregate.

I am now on Slide 13. As Chip mentioned, we are providing revenue and adjusted EBITDA guidance for the full year and third quarter of 2021. Please note this guidance only includes the post-merger Topgolf results for 10 months of 2021. For the full year, we expect revenue to range from $3.025 billion and $3.055 billion.

That compares to $1.590 billion in 2020 and $1.701 billion in 2019. The company's full-year 2021 net sales estimate assumes continued positive demand fundamentals for our golf equipment and soft goods segment; no further business, supply chain, and retail shutdowns due to COVID; and the Topgolf's 10 months of segment sales approach 2019 full year levels of $1.06 billion. The outlook also assumes $55 million of supply chain risk due to the current Southeast Asia COVID shutdowns, almost all of which is expected to occur in the third-quarter 2021. From a cost perspective, full-year 2021 non-GAAP operating expenses for our golf equipment and soft goods businesses are estimated to be approximately $100 million higher than full-year 2019 non-GAAP operating expenses.

This is $20 million to $30 million higher than we previously guided at the beginning of the year, and the increase is related primarily to variable costs associated with the strong performance of the business this year, accelerated investments in the TravisMathew brand to support its faster-than-expected growth and additional corporate infrastructure costs to support a larger organization. Investors should also note that approximately 85% of the incremental $100 million in expense is expected to be incurred in the second half of 2021 due in part to the Callaway apparel business in Korea that we took over from our licensee in July and a more normalized level of spend in the second half of 2021 to support all of our businesses. In addition, we are expecting continued cost pressure from increased freight costs and inflationary pressures, including labor and commodity pricing, at least through the first half of 2022. To date, positive volume variances have outpaced the majority of these increased costs, but they will continue to have some impact.

Full-year adjusted EBITDA is projected to be between $345 million and $360 million. The company's full-year 2021 adjusted EBITDA estimate assumes the Topgolf segment will deliver over $100 million in adjusted EBITDA for the 10 months beginning March 8, 2021. This estimate assumes a previously mentioned supply chain revenue risk and continued elevated freight and other cost pressures, which are expected to have an overall greater impact than we originally anticipated for the balance of the year. From a third-quarter perspective, we expect revenue to range from $775 million to $790 million versus 2020 revenue of $476 million and 2019 revenue of $426 million.

We expect adjusted EBITDA for the third-quarter 2021 to be between $51 million to $58 million versus 2020 of $87 million and 2019 of $57 million. This projected revenue growth represents the addition of Topgolf revenue as well as growth in the soft goods segment. Because of the previously mentioned supply constraints in the extraordinary second half the golf equipment business had in the second half of 2020, as interest in golf surge following the relaxation of COVID restrictions, we are forecasting third-quarter revenue for the golf equipment segment to be below 2020 levels but above 2019. While not optimal, the third quarter supply constraints are not currently forecasted to affect the fourth quarter of 2021 or even 2022 to any significant degree.

In closing, I would like to emphasize a couple of points. I know we have spent some time today discussing the short-term headwinds from COVID, particularly on the forecasted supply chain constraints in the third quarter. Although annoying, the short-term disruption will not have a long-term impact on our value or strategy. Investors should not lose sight of the fact we are having a tremendous year.

And yes, without those headwinds, we would be having an even better year, but this is still a great year. We're hitting our financial goals essentially a year ahead of what we had planned despite a challenging operating environment. Each of our segments are performing well. The Topgolf merger has been wildly successful, and we feel well-positioned for the future, both in a COVID operating environment and after.

We also remain very excited about the opportunities and growth prospects ahead of us. That concludes our prepared remarks today, and we will now open the call for questions. Operator, over to you.

Questions & Answers:

Operator

[Operator instructions] And your first question is from Brett Andress with KeyBanc.

Brett Andress -- KeyBanc Capital Markets -- Analyst

Hey. Good afternoon, guys. So, Chip, you alluded to Topgolf exceeding your expectations. You have a full quarter under your belt.

The golf industry is still robust, and it just seems like everything across this business is running a year ahead of schedule. So should we take your 2023 expectations from that S4 is a good baseline to think about the business next year? Just anything to help us with how you're thinking about next year, not this year's, I think, going so well.

Chip Brewer -- President and Chief Executive Officer

Brett, we are trending toward a year ahead. I think it might be premature to just take that simplistic approach and take the next year projection forward, and we're not providing any guidance for next year. But at this point, we couldn't be more pleased with the momentum and progress that we see in each of the business segments, and we remain optimistic. But I prefer not to get tied to any specificity on future guidance.

Brett Andress -- KeyBanc Capital Markets -- Analyst

No. Understood. I had to try. And then just on Topgolf, specifically, is there any update on the mix of walk-in versus events? I mean, is the walk-in business above 19 at this point? I'm just trying to gauge where we are in the recovery of the events business.

Right? Is that like 40%, 50%, or 60% recovery? Just any color there.

Chip Brewer -- President and Chief Executive Officer

Sure. I'll give you a little bit of color. It will be more qualitative than quantitative. But as we have discussed thus far, the walk-in business is quite strong and continued to strengthen during the quarter and has continued to be robust and strengthening even in early parts of Q3.

So while we're not going to give you a specific number on there, walk-in has been -- continued strong and continues to strengthen. So we're seeing very little weakness in that portion, and we're optimistic on that. We're also very pleased with the event business as that has strengthened throughout the year, and it is still not back to 2019 levels, but all trends there have been positive. We're going to keep our eye on that as the COVID situation continues to be dynamic, but there's been strong recovery and very pleased with the same venue sales.

Walk-in continues to lead. Corporate, recovering nicely -- or the event business recovering nicely, and we kind of outlined how we expect that to be -- to play out through the balance of the year.

Brett Andress -- KeyBanc Capital Markets -- Analyst

Thank you.

Operator

Your next question is from Randy Konik with Jefferies.

Randy Konik -- Jefferies -- Analyst

Yes. Thanks a lot. I got two questions, one for Chip, one for Artie. Chip, you talked about in your remarks about a larger market for golf.

So can you kind of talk a little bit about that or expand upon that a little bit more? How do you see this larger market unfolding ahead? And in terms of growth, can you see it being sustained over the medium and longer term? Just want to get your thoughts there. And then second, for Artie, I just want to get your perspective on how you feel about Topgolf, now that you've spent more time with the business. Give us your landscape and your perspective on what you see for the business ahead and your focus on it.

Chip Brewer -- President and Chief Executive Officer

OK. Great. Thanks, Randy. I'll take the golf equipment one, and Artie, you can then have your debut on the earnings call with Randy's other questions.

So we've been just delighted with the amount of demand that we've seen in the golf equipment segment, completely unprecedented growth over what has been a year period of time now. And it's been new entrants as well as return of our core segment and just a very healthy situation. It's been quite significant, as you can imagine, and that the demand has been up 40% to 50% over this period of time. So great for golf.

And although I think it's rational to expect some slowing in the near future, we haven't seen that yet. And the pure demand has been matching the 2020 levels. I think there's no question that demand is going to remain strong at this stage. I think in the second half of the year, it's going to be constrained by supply.

So we won't really get a picture of demand. But without a doubt, the market is considerably larger than it was at the end of 2019, entering 2020. The engagement of golfers is much higher. So in terms of sustainability of that, I think that it's showing that it is sustainable.

The little snapshots that we have now as the markets have opened has shown that that demand has remained. It's a sticky sport and game. Once you get into it, you tend to leave it very quickly. And when you join clubs, etc., you tend to play more.

So all of that looks good as well as the long-term growth rate as things such as Topgolf scale up. So we feel very positive about the game of golf and the golf equipment space going forward. Barring short-term volatility, we think we're in a great position overall. Artie, over to you for some thoughts on Topgolf.

Artie Starrs -- Chief Executive Officer, Topgolf

Sure. Thanks, Chip, and thanks, Randy. I mean the first thing I'd say it's great to be a part of Topgolf and the Callaway family. I received an extremely warm welcome from our associates and from our partners and just extremely enthusiastic to be here.

The first thing I would say and I think is the clearest takeaway for anyone who come into Topgolf is what a terrific team that we have, driving our unique and extremely differentiated culture. And if you go to our venues, what this translates to our passionate associates, really enthusiastic guests and then long-term advocates for the brand. And when I reflect on the leadership team that I've joined and the experiences that they have in entertainment and multiunit, hospitality and a ton of technology talent that we have, that's why we're seeing the momentum that Chip and Brian have shared. The time to date since I've been at Topgolf the last few months, I spent a lot of time in the venues -- in our current venues and then the venues that we're looking to build.

And I've been to approximately half of them so far. So 30 to 35 or so. And we have a highly relevant concept. When you see the guests coming in, it's perfect for the times.

People looking to get outside the house, spending time with family and friends. The energy level is extremely high. The second thing I'd say is we've got multiple channels to drive top-line growth and multiple levers to drive profits. Beneath that, we have a labor model that allows for a lot of flexibility.

So I'm excited about our ability to do that going forward. And then the final thing is when we go into a new market, when we look at these new markets, we've got such a robust pipeline. The cities and the towns that we meet with, they're so excited about Topgolf coming. So the pipeline that Chip has shared in the past, I'm very enthusiastic about.

And yes. So the focus for us, I think coming out of this, Randy, is to continue to do what we've always done, which is that innovator in the what we call the bay experience where most of our guests spend their time. You've probably seen, we've promoted some internal talent. We have a new COO.

We're very excited about Gen Gray. And we have two external hires that have come in, a new CMO and a new CPO, that I think are going to accelerate this guest experience work and organizing and focusing our team around that. And the final thing I'd say on behalf of the Topgolf team is that we shared Chip and Brian's excitement for the future of Topgolf, and we're thrilled to be a part of the Callaway portfolio and adding to the growth there.

Randy Konik -- Jefferies -- Analyst

Very helpful. Thanks, guys.

Artie Starrs -- Chief Executive Officer, Topgolf

Thanks, Randy.

Chip Brewer -- President and Chief Executive Officer

Thank you, Randy.

Operator

Your next question is from Daniel Imbro with Stephens, Inc.

Daniel Imbro -- Stephens Inc. -- Analyst

Hey. Good afternoon, everybody. Thanks for taking my question. Chip, maybe starting on the core golf business.

Looking at the reported market share, it looks like you definitely picked up some share kind of across the category list. Is that a function of better in-stocks to meet demand? Does that -- does your more domestic manufacturing footprint maybe help with some of these supply issues we're hearing about? And then any comments on how you're feeling about your share heading through the back half here?

Chip Brewer -- President and Chief Executive Officer

Sure. Daniel, yes, we had a good quarter in market share. So Q2, we picked up nice share in -- relative to where we were entering the quarter, I think, in both clubs and ball, but particularly in ball. We had a very strong quarter in golf ball and ended up finishing the quarter at record levels.

So really pleased with the trends there. Our shares are still a little bit down relative to where they were on the club side a year ago. Much of that is just launch cadence, if you would, by the fact that last year, we didn't have -- two of the big four didn't launch metal woods. This year, they did.

So by just math, there's going to be some pressure on that. But I was very encouraged to see the uptick in the quarter. I think our supply chain did a good job, but I think it was more just how our product resonated and the strength of the brand once it gets out into the demo season, etc. So I think it was underlying strength of product performance's brand that really drove that good performance during the quarter and obviously encouraged by that.

Looking toward the second half, I don't have any projections for you at this point. I think a lot of what you're going to see in the second half is going to be supply constrained, depending on what comes in or out of Vietnam and who moves into producing products or launching products because we're going to be all making decisions on what we make for right now or what we make for 2022. So there'll be some volatility in those numbers, but our brand strength and strength did show through during the quarter, and we were pleased with that.

Daniel Imbro -- Stephens Inc. -- Analyst

That's helpful, Chip. And then just a second question on Topgolf guidance. I think in the slide, you said 3Q comps should be better -- or same venue sales should be better than 2Q. 4Q should step down a bit.

But just using 2Q's profitability, I mean, that implies over $100 million just in back-half EBITDA. Can you maybe help us square that away with the full-year guide for about $100 million in Topgolf adjusted EBITDA? Are there cost offsets? Is it just conservatism? How should we think about that Topgolf profitability guidance?

Chip Brewer -- President and Chief Executive Officer

Brian, you want to take a shot at that one?

Brian Lynch -- Chief Financial Officer

Yes. I mean, just generally, I'd say the business is seasonal, and you're catching Topgolf at Q2, which is their most profitable EBITDA quarter, and it ramps down as the year goes. Q2 and Q3 are their best. Q2 is the biggest one by far.

And then the fourth quarter will be affected by the mix of corporate events or walk-in business. But I think it's just the seasonality of that business.

Patrick Burke -- Head of Investor Relations

Yes. And Daniel, this is Patrick. Maybe just to add to that, remember, they're not fully -- they had been fully staffed in the first half in the venues, and they continue to work to kind of build their staffing levels up. So some of the first-half profitability is going to be a little harder to anniversary as they get fully staffed.

Chip Brewer -- President and Chief Executive Officer

Right. And then there's the opex ramp would be the last element of that. So all of those factor into the forecast.

Daniel Imbro -- Stephens Inc. -- Analyst

And is that opex ramp, Chip, in Topgolf specifically that you guys called out? Or is that across the business?

Chip Brewer -- President and Chief Executive Officer

It's across the business, but it does include Topgolf. For instance, Artie talked about new hires, etc., and those new hires will be starting in the second half. And we're scaling this business to -- for bigger and better things. So we're making those investments as we go.

And our growth has been faster than expected. So the opex ramp -- trails that growth but also foreshadows good things in the future as well. So we're pleased with it, but you will continue to see it occur both in Topgolf as well as, as Brian explained, other areas of our business.

Daniel Imbro -- Stephens Inc. -- Analyst

Very helpful. Thanks so much, and best of luck.

Chip Brewer -- President and Chief Executive Officer

Thanks, Danny.

Operator

Your next question is from Joe Altobello with Raymond James.

Joe Altobello -- Raymond James -- Analyst

Thanks. Hey, guys. Good afternoon. Thanks for taking my question.

I guess first question on the supply chain impact that you cited in the second half, the $55 million. Both of you, Chip and Brian, indicated that you feel like that's pretty short term, and it's going to be a largely a Q3 event. What gives you that confidence that we don't see that extend beyond Q3 into Q4, for example?

Chip Brewer -- President and Chief Executive Officer

Yes, Joe. This is Chip. And clearly, we don't know. The one thing -- we've been through this before.

And so we are using that past experience to estimate that. But there's always a chance that there's more volatility than what we're projecting. We are projecting right now that the factories in Vietnam are closed for a reasonable portion of Q3 and that they were then able to open and start producing at a reasonable level but not at a completely unimpacted level beyond that. So it is, in essence, our best guess.

But in today's day and age, anybody that tells you they know for sure is not being completely honest. But we have pretty good experience here, and we have a fairly diversified and balanced supply chain, which I think is an advantage over the long run.

Joe Altobello -- Raymond James -- Analyst

That's very helpful, Chip. And just a second question, I guess more big picture. How confident are you in the equipment industry and grow off of these elevated levels in '22? Do you worry about the replacement cycle, particularly for clubs, has been accelerated and perhaps you're pulling forward some demand that you might have seen next year and in 2023 into 2020 and 2021?

Chip Brewer -- President and Chief Executive Officer

Yes. I definitely am a little worried about that, Joe. But what we're seeing -- as I said, I think it's rational to assume that it's going to slow from the rates that it has been, but we're not seeing that yet. So even as other opportunities opened up, we're still seeing demand match 2020 levels.

Now we've got a narrow window at that. What I'm highly confident in is that there's going to be strong demand and there's going to be a larger market than when we entered. Is it going to grow off 2020 numbers? I can't say that. Is it going to be equal to 2020 numbers? I can't say that.

It could be slightly up, slightly down. But all of the facts that we do have are suggesting strong demand. And as of yet, we haven't seen it decline, even though at this time last year, there were no other alternatives really, and now there are.

Joe Altobello -- Raymond James -- Analyst

OK. Great. Thank you, guys.

Brian Lynch -- Chief Financial Officer

Thanks, Joe.

Operator

Your next question is from Casey Alexander with Compass Point.

Casey Alexander -- Compass Point -- Analyst

Hey. Good afternoon, and thanks for taking my questions. Chip, this is for you. I mean, first of all, just seeing the golf equipment and apparel business produce sales that are almost two times inventory turns in one quarter is a remarkable achievement by your team, and your team should be really congratulated for that.

That's an incredible management of complexity with the supply chain issues in transportation and logistics. I mean, it's really unbelievable.

Chip Brewer -- President and Chief Executive Officer

Thank you, Casey. And they're going to be thrilled to hear you say that. Thanks for mentioning it.

Casey Alexander -- Compass Point -- Analyst

Yes. And as you said, you're running at almost 100% capacity across a bunch of lines. So I'm curious how you're thinking about some interesting decisions that you have to make, which is what parts of the business do you increase capacity in making sure that you continue to run at high utilization rates, but when you presume that you're running at a hundred percent of sales, you're almost -- the presumption is that you might be missing some sales somewhere or you're just constantly chasing demand. How do -- where do you increase capacity, maintain high utilization but not miss sales?

Chip Brewer -- President and Chief Executive Officer

Yes. Great question. And that's an interesting dilemma or it's a classy problem that we've got over the last period of time. But we're growing our capacity in a lot of different areas, and some of it has been masked by the low inventory levels that you've just mentioned.

So we entered the year with very low inventory levels. And so we've been in a constant chase situation, and demand has just been at such a high level. But we are increasing capacity. We're increasing capacity in golf ball.

We -- and we're increasing capacity in the premium club side of the business, and we're increasing capacity in the package set -- side of the business. And those have been phasing in. We've seen the results of them. We'll have more capacity in the near future on some of that, and it'll be phasing in through the first half of next year as well.

So we're making sure that we don't, I guess, drive by the exit, but we are also aggressively investing in capacity and able to support what we think is going to be a great opportunity going forward.

Casey Alexander -- Compass Point -- Analyst

And coming out of the quarter, where would you suggest that your ball share is running at now?

Chip Brewer -- President and Chief Executive Officer

I think our ball share, correct me, Patrick, if I'm wrong, according to Datatech, was 18% in the U.S. And I think Datatech understates our actual ball share.

Casey Alexander -- Compass Point -- Analyst

But that would be the highest number that you've recorded. Am I correct?

Chip Brewer -- President and Chief Executive Officer

That's correct. That's the highest Datatech -- there's just no question, our golf ball business is building momentum and continues to show great opportunity.

Casey Alexander -- Compass Point -- Analyst

Terrific. Well, thanks for taking my questions. I appreciate it.

Chip Brewer -- President and Chief Executive Officer

Thank you, Casey.

Brian Lynch -- Chief Financial Officer

Thanks, Casey.

Operator

Your next question is from Susan Anderson with B. Riley.

Susan Anderson -- B. Riley FBR Inc. Analyst

Hi. Thanks for taking my question, and let me add my congrats on the quarter. I guess as a follow-up on the golf ball segment, is there still inventory issues there also? Or is it mainly just the golf equipment business coming from Asia?

Chip Brewer -- President and Chief Executive Officer

Inventories are very low there as well.

Susan Anderson -- B. Riley FBR Inc. Analyst

For golf ball.

Chip Brewer -- President and Chief Executive Officer

Yes, Susan. So we're constrained on supply or demand has been so exceptional that we can't keep up with it, however you want to look at it. But golf ball has also been a high-growth business, and we're optimistic going forward.

Susan Anderson -- B. Riley FBR Inc. Analyst

Great. OK. And then I guess maybe just to talk a little bit about Jack Wolfskin, the revenue almost back to '19 levels. It seems like that business has turned around quite a bit.

I guess, was that mainly driven by DTC? Or did you also see strong wholesale sales? And then I guess what's your expectations going forward for the brand? Are you guys expecting the momentum to continue in the back half in 2022?

Chip Brewer -- President and Chief Executive Officer

Well, let me talk about just the momentum side of it. First of all, we don't expect them to be back to 2019 revenue levels this year in total. What my comment was it was that the 2019 retail, so our own stores, which is a significant channel for us, I mean, we have 120 stores in Europe, was almost equal to 2019 during the quarter. But Susan, they were shut for half the quarter.

So that gives you an indication of how robust it came back. We will be lower than 2019 revenues for all of Jack Wolfskin, but the business is recovering beautifully. The sell-through has been great. The prebooks are strong.

And the business, although significantly still impacted by the COVID environment, particularly in Europe, is just showing great momentum. So I don't see a reason why that will -- that momentum will slow. I've seen it now for close to a year. The new team and -- is doing a great job.

When you see good sell-through of the previous lines and good prebooks and you start to see that as a trend, you know how reinforcing that can be. The environment is going to be a little bit volatile, I expect, but the business is really performing well. It could have been a very difficult year. It's not going to be a bad year at all, and the momentum and trends for the business are very positive going forward.

Susan Anderson -- B. Riley FBR Inc. Analyst

Great. So it's been positive. Thanks so much. Good luck the rest of the year.

Chip Brewer -- President and Chief Executive Officer

Thanks, Susan.

Operator

Your next question is from John Kernan with Cowen.

John Kernan -- Cowen and Company -- Analyst

Yes. Excellent. Thanks for taking my question, and congrats on all the momentum at the core golf equipment business and obviously Topgolf as well. Wanted to go back to maybe a longer-term question on golf and maybe just on the margin profile of the core Equipment and soft goods business.

It tended to get to a low double-digit, high single-digit operating margin, and that was maybe the peak of it. Do you think that that core golf business, both on the equipment and soft goods side now, is ready to inflect higher in terms of the gross margin and operating margin structure given the market share you're gaining, also just the category's growth and better sell-through and sell-in across retail channels as well? It just seems like there's a lot of momentum in the core part of the business that would support a structurally higher margin in that business. Can you talk to that?

Chip Brewer -- President and Chief Executive Officer

Sure, John. I'll give you again a couple of points on it. And there's a fair amount of puts and takes right now as we look at the potential headwinds and the potential strengths. The demand side of the equation is outstanding, and the categories we're in are great.

But you've listened to so many of these earnings calls, and we don't need to reiterate inflationary issues or freight costs, etc., that are going to be realities for all businesses over the next few months. At the current demand levels, we think we're going to deliver strong financial results. But those macroeconomic headwinds are out there for us as well, and they will temper some of that upside. Still an excellent situation.

Structurally, as these businesses scale, and they're scaling very nicely and very quickly, we're well ahead of all of our previous expectations for the size of these businesses, and all of them have good momentum, yes, the operating margins will have more long-term structural opportunity just, in essence, because of scale, if nothing else.

John Kernan -- Cowen and Company -- Analyst

Got it. Maybe one more question. Just as a follow-up on the back half guidance. Roughly $290 million in adjusted EBITDA in the first half given us pretty specific Q3 guidance.

What specifically in Q4 is driving the EBITDA down so much? Because I think $55 million is the guide for Q3, $352 million or roughly for the full year. Just curious, can you be more specific? Is it just something on -- it's all opex in Q4? How should we think about SG&A dollars in that fourth quarter?

Brian Lynch -- Chief Financial Officer

Yes.

Chip Brewer -- President and Chief Executive Officer

Brian, over to you.

Brian Lynch -- Chief Financial Officer

Yes. John, it's really just the opex spend, John, and how it ramps through the year as we go through with the additional investments and everything. And the ramp will continue into 2022, as Chip mentioned, as we really prepare to have a larger organization and continue to invest in the business to drive growth. I mean, ideally, overall, with opex, you would love for it to pace with your expansion, but it tends to be lumpy.

And we've been behind it during the first half, and we'll start to ramp up, and we'll get ahead of it a little bit. And so it's just -- unfortunately, it's just a little bit lumpy, but it's really just the additional opex.

Patrick Burke -- Head of Investor Relations

Yes. And, John, this is Patrick. I would just say also normal seasonality. So remember, first half is always the golf equipment and apparel is best from an EBITDA, and same thing for Topgolf, right? Q2 was, by far, their biggest quarter.

So there's a little seasonality that's mixing in there as well.

John Kernan -- Cowen and Company -- Analyst

Got it. Thank you.

Chip Brewer -- President and Chief Executive Officer

Thank you.

Operator

Your next question is from Rudy Yang with Berenberg.

Rudy Yang -- Berenberg Capital Markets -- Analyst

Hey, guys. Thanks for taking my questions. It sounds like your soft goods and apparel business benefited strongly during the quarter due to reopenings and continued recovery from COVID. So are you expecting for traffic to add much stronger growth for those retail sales in the back half of the year? Or will sales, driven between stores and e-commerce, continue to remain similar to what we've been seeing in the near term?

Chip Brewer -- President and Chief Executive Officer

Rudy, yes, the soft goods and apparel business, specifically Jack Wolfskin. So it's only Jack Wolfskin that was heavily impaired during the first half due to COVID. And as the stores reopen there, you'll get a more normal mix of -- between the various channels. And then, as obviously mentioned, we see good momentum in that business.

The TravisMathew business has been strong all year, with all channels firing on all cylinders, candidly. So that business is nothing short of outstanding. Then the apparel in Asia will benefit from the start of the Korea apparel business that we just took in-house. So quite a bit going on in that segment and -- but we're hoping for and expecting a more normalized second half in terms of channel mix.

Rudy Yang -- Berenberg Capital Markets -- Analyst

Got it. And then secondly on pricing you started to take, could you just remind us how much pricing power you would say you have across your different segments? And when you talk about possibly taking some pricing going forward, how much more room do you think you have to continue passing down those prices?

Chip Brewer -- President and Chief Executive Officer

Sure. Rudy, it's going to be a qualitative, not a quantitative answer. We've already started to take a little bit of price selectively in multiple segments. So at Topgolf, a little bit on food and beverage.

We will be evaluating further steps in the future. We do not see that as a risky proposition at Topgolf. On the golf equipment side, we've already taken it on select products, and we will evaluating on new products to deal with the inflationary environment that we're all operating in right now. And I know that's also true on the apparel side.

In each of the segments that we are fortunate enough to be participating in, we're in enthusiast segments, we have strong consumer interest and appetite, and we just don't think that our consumers are especially price-sensitive. So inflation will have some impact on our business, as it does on others, but less so than most as we believe we have stronger-than-most pricing power. And we've seen previous periods, whether it be commodity inflation or more normalized inflation, we've been able to work through that without meaningful impact. The other aspect with this is that we just have such strong demand right now that we have operating leverage as well that can help us offset some of that.

Rudy Yang -- Berenberg Capital Markets -- Analyst

Thanks. Super helpful. Thank you.

Operator

And there are no further questions at this time. I'll turn the call back over to Mr. Chip Brewer for closing remarks.

Chip Brewer -- President and Chief Executive Officer

Well, I want to just thank everybody for tuning in today. We're obviously delighted with the results for Q2. And although there is volatility in the marketplace right now as we project forward, we couldn't be more pleased with what we're seeing for the long-term health of this business and our growth prospects. Thanks so much for your time today, and we look forward to talking to you again at the end of next quarter.

Operator

[Operator signoff]

Duration: 68 minutes

Call participants:

Patrick Burke -- Head of Investor Relations

Chip Brewer -- President and Chief Executive Officer

Brian Lynch -- Chief Financial Officer

Brett Andress -- KeyBanc Capital Markets -- Analyst

Randy Konik -- Jefferies -- Analyst

Artie Starrs -- Chief Executive Officer, Topgolf

Daniel Imbro -- Stephens Inc. -- Analyst

Joe Altobello -- Raymond James -- Analyst

Casey Alexander -- Compass Point -- Analyst

Susan Anderson -- B. Riley FBR Inc. Analyst

John Kernan -- Cowen and Company -- Analyst

Rudy Yang -- Berenberg Capital Markets -- Analyst

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