Callaway Golf (ELY) Q4 2021 Earnings Call Transcript

Callaway Golf (MODG 1.23%)
Q4 2021 Earnings Call
Feb 10, 2022, 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 fourth quarter 2021 earnings call. At this time, all participants are in a listen-only mode, and during the Q&A session, we ask that you please limit your questions to one and a follow-up to allow as many participants as possible to ask a question. And I would now like to hand the conference over to your speaker for today, Lauren Scott, director of investor relations.

Thank you. Please go ahead.

Lauren Scott -- Director of Investor Relations

Thank you, operator, and good afternoon, everyone. First, I'd like to thank you all for your patience. We're having a technical difficulty on our end, and we'll be extending the call by 15 minutes to be sure that we make up for any of the lost time. So, thank you very much for your patience.

As the operator said, I'm Lauren Scott, the company's director 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. Patrick Burke, Callaway's SVP of global finance; and Jennifer Thomas, our chief accounting officer, are also in the room today for Q&A. Earlier today, the company issued a press release announcing its fourth quarter and full year 2021 financial results.

In addition, there is a presentation that accompanies today's prepared remarks that may make it easier for you to follow the call. This earnings presentation, as well as the earnings press release, are both available on the company's Investor Relations website under the Financial Results tab. Most of the financial numbers reported and discussed on today's call are based on U.S. Generally Accepted Accounting Principles.

In the 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 coordination -- 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 is contained in the presentation and press release for a more complete description. And with that, I'd now like to turn the call over to Chip Brewer.

Chip Brewer -- President and Chief Executive Officer

Thank you, Lauren, and happy birthday this week, by the way. Good afternoon to everyone on the call. Thank you for joining us today, and also thank you for your patience. We apologize for the late start.

I'm pleased to report another quarter of strong results and look forward to providing more detail around our outlook for the year ahead. But first, I want to take a moment to acknowledge the incredible year we just concluded. 2021 was a pivotal year for Callaway marked by exceptional results significant growth and strong momentum across all our business segments. We closed on the acquisition of Topgolf in Q1, transforming our company into the unrivaled leader in the modern golf and lifestyle apparel space.

Over the past five years, we've combined a traditional Golf Equipment business with select lifestyle apparel brands and the world's leading tech-enabled Golf entertainment company to deliver a truly differentiated business model. Amid continued high demand for our Golf Equipment and Lifestyle products. Our global sales and operations teams worked tirelessly delivering quarter after quarter of impressive results despite significant global COVID-related operating challenges. The team has proven itself to be an impressive and battle-hardened asset for [Audio gap].

In addition, we've increasingly made key investments in infrastructure and people to support a larger business and to set us up for continued growth and financial success. I want to personally thank all of our global employees for their hard work throughout the year. Our positive results would not be possible without your dedication and passion for this business. Shifting to Q4.

Our results came in better than expected, led by another quarter of exceptional results from Topgolf and continued high demand for both Golf Equipment and Lifestyle Apparel and Gear. Total net revenue was $712 million, up 90% year over year, and adjusted EBITDA was $14 million, up $27 million. Turning to Topgolf, for the quarter, both walk-in traffic and event sales surpassed our expectations, driving same venue sales to an impressive increase of 6% over 2019 levels. For the full year, same venue sales were approximately 95% of 2019 levels, meaningfully higher than projected and an encouraging and very strong result given the operating environment.

A resurgence in corporate events business drove most of the same venue sales positive surprise in Q4. Walk-in sales in smaller social events have been strong for some time and continued their trends. Having said this, as one would expect, in the last week of December and continuing into January, we have seen some softness in same venue sales as the rise in omicron has resulted in a decline in group events and increased short-term staffing challenges. While this will have an impact on Q1 results, it was promising to see that our U.K.

venues, which experienced omicron impacts approximately a month ahead of our U.S. venues bounce back very quickly and are now once again performing quite well. This is a good indicator of the resiliency we expect in the U.S. business through the remainder of Q1 and we are already starting to see some signs of this anticipated improvement.

For the first quarter of 2022, we're expecting same venue sales to be down slightly compared to 2019. And for the full year, we anticipate low single-digit growth over 2019 levels. New venue openings continued on pace with our 72 Bay Fort Myers, Florida location opening strongly in mid-November. While we're on venues, I want to remind everyone on the success rate we're consistently delivering here.

We had nine very successful openings in 2021, and the financial performance of this group is on track to exceed our expectations despite the challenging operating environment. I've had a ringside seat watching Topgolf open venues for nearly 10 years now. And in my opinion, we are uniquely good here. As a result of increasing brand strength, competency of our real estate team, and our operating team's expertise, this is now a proven and repeatable model, a fact I believe the financial community may not fully appreciate yet.

For 2022, we are confident in our ability to deliver at least 10 new venues with the potential of adding an 11th in very late Q4. We're also extremely excited about the lineup for this year, with the first two Southern California locations opening in the Los Angeles area in Q1 and Q2: one in Ontario, which is just east of LA; and the other in El Segundo, near SoFi Stadium. The El Segundo location is particularly intriguing as is the first venue to include an on-course element. And in true Topgolf fashion, this will not be your typical golf course.

It will be a 10-hole lighted course perfect for night-time rounds, incorporating elements of entertainment and our Toptracer technology to create a truly unique guest experience. Additional locations of note include Seattle and Baltimore, both of which will feature our latest premium venue enhancements, as well as Callaway fitting base. It's important to note that due to the disruption of the development activities in 2020, the timing of this year's venue openings will be heavily weighted toward the back half of the year with five expected to open in Q4. This timing will impact this year's contribution from new venues.

Shifting to Toptracer. During [Audio gap] we installed over 1,700 new bays, bringing our total for the year to just under 7,000 new bay installations. We remain encouraged by continued strong demand and expect to install 8,000 bays or more in 2022. Lastly, within the Topgolf media business, I'm pleased to announce that we are leveraging our mobile game development expertise from World Golf Tour to launch a new game later this year that caters to the younger, more traditional gamer, whereas existing game focuses more on the traditional golfer.

While we expect the game to have minimal contribution to our financial results in 2022, we believe that it will provide future upside as our community of digital customers continues to grow. In addition, in due time, we'll integrate this new game into our digital offerings at both our venues and Toptracer ranges, thus driving synergies from our game development capabilities. Moving to our Golf Equipment segment. We're pleased to report that demand remains very high for our clubs and balls and trade inventory remains low across the industry.

According to the National Golf Foundation's annual report, the number of on-course golfers increased by approximately 300,000 in 2021 to 25.1 million players, marking the fourth straight year of increased participation in traditional golf. Off-course participation also continued to grow, with 24.8 million people visiting nontraditional venues such as Topgolf and 5-Iron and approximately half of those playing exclusively off course. Looking out over the next 12-months and beyond, as Topgolf venues continue to expand, we expect even more new players to be introduced to the sport, both on and off course. For Q4, our Golf Equipment results were in line with our expectations.

As we explained last quarter, we anticipated some softness in Q4 revenues as we made the decision to shift production to build 2022 new launch product. In addition, we launched several new products in the comparable fourth quarter of 2020, thus creating an uneven year-over-year comparison. As we look ahead to Q1 and the full year 2022, we are seeing promising momentum with the launch of our new Rogue ST family of Woods & Irons and new Chrome Soft golf balls. The reception has been very positive so far.

Pre-books are up significantly and feedback on the product has been outstanding, with Rogue ST being the No. 1 driver on tour in its first week on tour at the tournament of Champions, and Callaway receiving more gold metals than any other manufacturer in Golf Digest's Recent Hot list. The new launch product will be available at retailers starting next week. For the full year, we are reiterating our Golf Equipment business will grow based on continued strong demand from consumers, price increases on our new launch product, and the opportunity for a restocking at retail.

Turning to our Apparel and Gear. In our Apparel and Gear segment, revenue was up 33% year over year in Q4, led by a 40% increase in Apparel and a 19% increase in Gear. TravisMathew continued to grow at a roaring pace, with our own retail comp store sales up over 67% versus 2020. E-commerce sales were also up a healthy 30% versus 2020.

The team also signed a high-profile new ambassador, actor Chris Pratt, during Q4, who helped further increase brand visibility and raise awareness for a multi-day charity flash sale benefiting the Special Olympics. The event was very successful with TravisMathew contributing over $1 million in donations to this very worthy cost. On the product side, TravisMathew expanded its product range to include women's apparel as part the His and Her Cloud Collection launched in December, as well as more cold-weather gear within their outerwear collection. Both additions performed very well with the women's product selling out predominantly in the first 48 hours, and jackets and pants accounting for 37% of direct-to-consumer sales.

Jack Wolfskin sales were up in the quarter as compared to both 2020 and 2019 as the public relaunch of the brand's fresh new image was positively received by consumers. Feedback on prebooks has been outstanding, and we're excited for the year ahead. On the sustainability front, Jack Wolfskin launched a new initiative in Q4 called the Nature Counts campaign, which is dedicated to forestry, rewilding, and conservation efforts. In place of Black Friday and Cyber Monday sales discounts, the brand decided to donate 2 euros from every purchase made during the week to Peter Rowland's Forest Academy.

We love to see the brand stay true to its roots and continue to be an ambassador for environmentalism. Lastly, our Callaway Apparel business in Asia continued to thrive. The Callaway Golf brand in Japan have the No. 1 share in the wholesale channel during the quarter and direct-to-consumer efforts paid off with strong sales in our owned retail stores as foot traffic in the region increased.

Looking ahead to 2022 and the consolidated company, we believe revenue will increase approximately 21%, and we expect adjusted EBITDA will be between $490 million and $515 million. This strong outlook is underpinned by our belief that our Golf Equipment business will continue to grow as participation remains high and supply continues to scales up to match exceptional consumer demand. Our strong prebooks and demand trends for [Inaudible] Apparel and Gear brands and embedded growth in the Topgolf business through new venue openings and year-over-year growth in same venue sales. Longer term, we remain excited and confident about the direction of the business.

While macro trends over the past two years have provided favorable tailwinds for golf, we believe there has also been a more sustainable structural shift in the market that will support all of Callaway's businesses. These structural shifts include what we believe are long-term increases in remote and hybrid work. The increase desire to get out in the nature. The momentum behind Casual Lifestyle Apparel brands, the growth of new golfers with waiting list to get into golf courses, and the growth and positive impact of off-course golf.

Off-course golf experiences such as Topgolf are both growing rapidly in their own right and at the same time, changing the way people are introduced to the sport of golf, creating increased interest in more new entrants. We believe Callaway is uniquely positioned to engage with these consumers through our differentiated portfolio of brands and look forward to unlocking the embedded growth within this business for years to come. In conclusion and before handing the call off to Brian, I want to call out two additional items. First, I'm pleased to announce that we're planning to publish our first comprehensive sustainability report next month.

As a company, we were [Inaudible] Callaway's view that good ethics is good business, and we continue to operate with this ethos at our core today. You will see this theme carried out through the report and through the four strategic pillars of our sustainability strategy: people, planet, product, and procurement. I encourage you to review the report and when it comes out and engage with the team to discuss the content is an important component of our long-term business strategy. Second, I'm very excited to announce our plan to hold an Investor Day in Q2, where you have the opportunity to hear more from senior executives across each of our businesses and learn more about our medium- and long-term vision for the company.

More details for this event will be provided by the IR team in the coming weeks, and we hope you can participate. And with that, I'd like to turn the call over to Brian Lynch to discuss our financial results in more detail.

Brian Lynch -- Chief Financial Officer

Thank you, Chip. 2021 was an outstanding and transformational year for Callaway, which is clearly highlighted in our financial results. The Topgolf business recovered from COVID more quickly and significantly than we expected and demand for our Golf Equipment and Apparel products remain strong throughout the year and has continued so far in 2022. As Chip mentioned, we believe there has been a structural shift in the market that will benefit each of our businesses including increased interest and participation in golf, momentum behind Casual Lifestyle or Power brands, and an increased desire for leisure and entertainment, such as Topgolf, hiking, and camping.

As a result, we expect continued high demand and growth across each of our businesses into 2022 and beyond. Shifting to our financial results. As shown on Slides 10 and 11, consolidated net revenue for the full year 2021 was $3.1 billion, a 97% increase, compared to full year 2020 revenue of $1.6 billion. Full year 2021 adjusted EBITDA was $445 million, an increase of 170% over full year 2020 adjusted EBITDA of $165 million.

The outperformance versus our guidance was related to Topgolf and resurgence in corporate events during the quarter, as Chip mentioned earlier. The Golf Equipment and soft goods businesses were in line with our guidance. When you look at a breakdown of our 2021 revenue, Golf Equipment represented 39% of total revenue. Topgolf was 35%, and Apparel, Gear, and Other represented 26%.

We believe Golf Equipment continued to grow at a steady pace and be an important component of our strategy moving forward. But as Topgolf venues continue to expand at the rate of 10-plus new openings per year, and the strong momentum of TravisMathew and Jack Wolfskin continues, we see a larger portion of our revenue more toward these high-growth segments. For the fourth quarter, consolidated net revenue was $712 million, an increase of 90% compared to Q4 2020. Topgolf was the largest contributor by segment, generating $336 million.

Our strong social events, strengthening corporate events, and continued robust demand from walking guests collectively delivered 6% same venue sales growth over 2019. Apparel, Gear, and Other also performed very well during the quarter with revenue up 33% year over year as strong brand momentum, recovery from COVID, and well-positioned products translated to strong sales growth in the quarter. Consistent with our guidance, and as Chip highlighted earlier, the Golf Equipment segment was down year over year due to third-quarter supply chain disruptions and a shift to prioritizing 2022 new launch inventory over fourth quarter 2021 sales. We also launched several new products in Q4 2020, thus creating an uneven year-over-year comparison.

Changes in foreign currency rates had a $6 million negative impact on fourth quarter 2021 revenues. Total costs and expenses were $755 million on a non-GAAP basis in the fourth quarter of 2021, compared to $397 million in the fourth quarter of 2020. Of the $358 million increase, Topgolf added an incremental $330 million of total costs and expenses. The remaining $28 million increase includes moving spending levels back toward normal levels, increased corporate costs to support a larger organization, investments in growth initiatives, including TravisMathew expansion and the Korea apparel business, and increased freight costs and inflation.

As we move into 2022, we continue to believe that higher sales volumes and select price increases will balance out inflationary pressures. Fourth quarter 2021 non-GAAP operating income was a loss of $43 million, down $21 million, compared to a loss of $22 million in the fourth quarter of 2020 due to the previously mentioned planned shift in Golf Equipment supply to 2022 launch products, as well as the increased costs previously mentioned. Non-GAAP other expense was $37 million in the fourth quarter, compared to other expense of $13 million in Q4 2020. The increase was primarily related to a $28 million increase in interest expense related to the addition of Topgolf.

Non-GAAP loss per share was $0.19 on approximately 186 million shares in the fourth quarter of 2021, compared to a loss of $0.33 per share on approximately 94 million shares in the fourth quarter of 2020. Lastly, fourth quarter 2021 adjusted EBITDA was $14 million, compared to negative $13 million in the fourth quarter of 2020. The $27 million increase was driven by a $46 million contribution from the Topgolf business. Turning to certain balance sheet items on Slide 13.

I am pleased to report that we are in a strong financial position with ample liquidity. As of December 31, 2021, available liquidity, which is comprised of cash on hand and availability under our credit facilities was $753 million, compared to $632 million at December 31, 2021, an increase of 19%. In addition, the Topgolf funding requirements from Callaway have improved compared to our initial expectations. When we announced the merger over a year ago, the funding needs for Topgolf were estimated at $325 million.

As of year-end, their need for funding was significantly lower due to its faster-than-expected recovery and strong 2021 performance. At this point, we estimate that Topgolf will need almost $200 million less funding than we originally anticipated. And going forward, we estimate Topgolf will only need incremental funding from Callaway of less than $70 million, which would be used for future venue growth. Topgolf is already operating cash flow positive [Audio gap].

And we expect Topgolf to be able to fund its own growth and be free cash flow positive in 2024. At quarter-end, we had a total net debt of $1.4 billion, including venue financing obligations of $593 million related to the development of Topgolf venues. Since the merger, our leverage ratios have improved significantly. Our net debt leverage ratio was 3.1 times at December 31, 2021, compared to five times at March 31, 2021.

Consolidated net accounts receivable was $105 million, a decrease of 24%, compared to $138 million at the end of the fourth quarter of 2020. Days sales outstanding for our Golf Equipment and Apparel businesses improved to 35 days as of December 31, 2021, compared to 45 days as of December 31, 2020. Our inventory balance increased to $523 million at the end of the fourth quarter of 2021, compared to $353 million at the end of the fourth quarter 2020 as we built supply for our new products within the Golf Equipment and Apparel businesses. In addition, Topgolf added $22 million in inventory.

Capital expenditures for the full year 2021 were $234 million, net of REIT reimbursements. This includes $173 million related to Topgolf, primarily for new openings for the 10 months since the merger. This does not include $12 million of capex for January and February of 2021 prior to the merger. The full year 2022 forecast for Callaway and Topgolf is approximately $310 million, net of REIT reimbursements, including approximately $230 million for Topgolf.

This increase in capital expenditures is due to the timing of REIT reimbursements and investment in systems integration and growth within the Golf Equipment and Apparel businesses. Lastly, on December 13, we announced that our board of directors approved a $50 million stock repurchase program. We repurchased a total of approximately 947,000 shares at an average price of $26.41 during the quarter and now have approximately $25 million authorization remaining under that program. Now, turning to our full year and first quarter 2022 outlook on Slide 14 and 15.

For the full year, we expect revenue to be approximately $3.8 billion. That compares to $3.13 billion in 2021. Our full year 2022 net revenue estimate assumes continued positive demand for our Golf Equipment and soft goods segments and no significant supply chain or retail shutdowns due to any COVID resurgence. It also assumes approximately $1.5 billion in net revenue from Topgolf for the year.

Full-year adjusted EBITDA is projected to be $490 million to $515 million, which assumes approximately to $210 million to $220 million from Topgolf. As Chip stated, we plan to add at least 10 new Topgolf venues in 2022, although the venue openings will be heavily weighted toward the back half of the year with five expected to open in the fourth quarter. From a profitability perspective, this means our 2022 venues will have a more limited impact to adjusted EBITDA in 2022 as we will incur full preopening costs for those venues with limited revenue. From a cost perspective, we will be making investments in personnel and infrastructure to support an overall larger business and future growth.

We also anticipate continued cost pressure from increased freight cost and inflation including labor and commodity prices. Lastly, we anticipate a negative impact from changes in foreign currency rates of approximately $54 million on revenue and $38 million on pre-tax income due to a strengthening U.S. dollar and $8 million in hedge gains that are not expected to repeat. Despite these headwinds, we continue to believe strong demand, sales volumes, and select price increases across our business segments will balance out these pressures, and we expect all businesses to grow this year.

Lastly, looking at the share count for full year 2022, want to note an accounting change taking effect this year that will cause our share count to increase to approximately 204 million shares. This change relates to the accounting for our convertible bond. This new role will require us to account for the bond, assuming it has been converted for calculating earnings per share. When calculating EPS, we will eliminate the interest paid related to the bond, and we will add 14.7 million shares to the EPS calculation as if the bond had been converted.

For purposes of this calculation, we do not include the benefit of the [Inaudible] transaction we entered into at the time of the bond issuance, which at maturity would reduce the number of new shares issued by us [Inaudible] conversion by approximately 4 million to 5 million shares at current prices. Moving to the first quarter 2022 outlook. Our revenue guidance is just over $1 billion. Adjusted EBITDA guidance is $130 million to $145 million.

This includes a negative foreign currency impact of approximately $21 million on revenue and $21 million in pre-tax income. Again, including the $8 million hedge gains in Q1 2021 that are not expected to repeat. I want to emphasize that there are several factors which could cause a positive or negative shift in our financial results between Q1 and Q2. Some of these factors include the timing of when we receive supply in the Golf Equipment or soft goods segments and whether products scheduled to be shipped at the end of March or beginning of April are deferred to Q2 or accelerated into Q1 as our Q1 guidance reflects our assumption that COVID continues to lessen during Q1 and that the Topgolf business including corporate events, returns close to 2019 levels.

The pace at which happens will affect our first-quarter results. We feel good about our full-year guidance. In closing, we are proud of the performance of our business in 2021 and are excited to share our continued progress throughout 2022. That concludes our prepared remarks today, and we will now open the call for questions.

Operator, over to you.

Questions & Answers:

Operator

Thank you, presenters. [Operator instructions] And we will pause for just a moment to compile the Q&A roster. We have our first question from Randy Konik. Your line is open.

Randy Konik -- Jefferies -- Analyst

Yeah, thanks, guys. So, first, I want to focus on the Topgolf venue business. The numbers keep coming in better than expected from a revenue perspective. And if I recall, you have the Vegas unit that's probably accounting for a disproportionate amount of revenue and EBITDA, but it's probably not at peak kind of prior peak revenues or what have you.

So, I guess I'm just curious if -- on the strength that you're seeing and that you're talking about, have you thought about kind of two things? One, what mature revenues would look like at the venue maybe being higher than you anticipate? And/or two, do you think about the density levels that can change from a unit perspective, i.e., you could potentially have more units in the U.S. market than you originally kind of thought? Just curious on how you're thinking. Thanks.

Chip Brewer -- President and Chief Executive Officer

Sure, Randy. Those are good questions. So, we have been wildly pleased with the performance of Topgolf and I want to congratulate that team on just terrific results. And the Vegas is a -- the Vegas venue is one of our biggest venues, so it does have a significant impact.

But we have a lot of venues now. So, I don't want to overfocus on any one venue. I do want to call out that even with this great result that we delivered last year, we do think we have gas in the tank. I mean, we saw throughout last year that business recovered and built momentum, and walk-in sales and social events were strong for most of the year, continued that way, with the only wildcard being the corporate events.

The corporate events started the quarter slow in Q4, and that's where we sat as we spoke to you on that Q3 earnings call. It seems like a long time away, but that -- we were actually in the middle of a surge in delta at that time. Nobody talks about delta, but delta was -- had surged, and we were seeing some concerning results on corporate, and then they really picked up in mid or through end of December. But we have gas in the tank left because corporate events hasn't completely recovered yet.

But we've got every belief and sign that it will, and we saw great evidence of that. At the Analyst Day that we'll be in Q2, we'll talk to you a little bit about the potential of these venues, which is clearly much higher than what we originally anticipated. And also, confidence, if not increasing view, on number of venues that we believe we can build. All systems go.

All systems positive, as you can tell, on the Topgolf venue business.

Randy Konik -- Jefferies -- Analyst

Super helpful. And I guess my last question is -- when I think about kind of pitching the idea to investors, it's this ecosystem opportunity with revenue synergy opportunity across different kind of businesses within the portfolio, I think I've asked this question in the past where, as a user of the Topgolf app, the Toptracer app, I've bought products from TravisMathew and so on and so forth, it appears to be -- there's opportunity to kind of get databases that you may -- or information you may have on select customers across these different businesses to kind of come together, if you will, and have these customers utilize different parts of the ecosystem more regularly or engage more with it. So, I'm just curious on what you're trying to do, if anything, on the kind of software side, back end kind of side of things to kind of connect the businesses more for these customers that are currently using different aspects of your ecosystem that could kind of just come together more to give you more data insights on how to kind of get them more engaged even further within that ecosystem? Thanks, guys.

Chip Brewer -- President and Chief Executive Officer

Yeah, Randy, that's another interesting and on-topic question, but it's also a long-term potential opportunity. That is not something that we would expect to realize overnight. But over time, we will have a significant competitive advantage over the overall reach to golfers of all types. And it will take technology, consumer data platforms, other types of technologies and offerings that will fit very well within our ecosystems to unlock that.

It's something that we have been studying and putting in the early stages of investments on now. And you're seeing some of the earlier low-hanging fruits on synergies already starting to materialize. You will continue to hear us increasingly talk about those types of opportunities that you're mentioning, but they are a little further downfield. And we're taking care of the bigger things first, and then those more strategic things are going to be more on point and more in the conversation set as we move forward.

Randy Konik -- Jefferies -- Analyst

Helpful. Thanks, guys.

Chip Brewer -- President and Chief Executive Officer

Thank you.

Thanks, Randy.

Operator

We have our next question from Alex Perry. Your line is open.

Alex Perry -- Bank of America Merrill Lynch -- Analyst

Hi. Thanks for taking my question, and congrats on the strong quarter. I just wanted to ask a little bit about the Topgolf venue profitability assumptions embedded within the guidance since they were, it seems, very elevated these past two quarters? And then maybe within that, talk about your outlook for labor costs and availability within Topgolf? And then just one clarifying question on the guidance for Topgolf for 2022. I think the presentation maybe said up mid-singles versus 2019.

I think maybe you mentioned up low singles on the call. Just wanted to clarify that for everyone. Thanks.

Chip Brewer -- President and Chief Executive Officer

Sure. So, on the venue profitability, yes, we have been delighted with the profitability that the venues have driven the consistency with which we did [Inaudible] open these successfully. You know, as I mentioned, I think it's a proven and repeatable model. But then also that the profitability that flow through from the venues, the EBITDAR margin, if you would, has been better than we originally expected, and we're going to give you a little more on that at that Analyst Day, but certainly pleasant results there, and a positive story.

Like most businesses, the labor cost and availability has been a challenge over the last year. And, you know, we've had -- we haven't been immune from that. At different points of time, labor has been a constraint. It varies by market, by season, etc.

And labor is increasing in cost. We are fortunate with our business that we're able to absorb that pay competitive wages. We were fortunate Topgolf just got named one of the most admired employers by Forbes, of large employers. And so, we're able to attract and retain labor effectively.

And we're able to absorb any costs there and deliver what has been obviously increasing profitability and margins. And then the expectation for same venue sales, I believe I said low single digit was the expectation for 2022 full year despite starting very slow here out of the chute. But we've shown our ability to grow these businesses, you know, in venue sales basis, and we're very excited about the outlook.

Alex Perry -- Bank of America Merrill Lynch -- Analyst

Thank you. That's really helpful. And then I guess just my follow-up would be, could you maybe help us parse through the 1Q guide a bit more? How much of the headwind is omicron on the Topgolf business, I guess? Is that mostly just on the corporate events side? It seems like maybe the corporate events were starting to approach 2019 levels in the beginning of 4Q. What is the visibility on that returning? And then what would be the outlook within the Golf Equipment business embedded within the guidance? Thank you.

Chip Brewer -- President and Chief Executive Officer

Sure. So, the corporate was the area that is most impacted at Topgolf. We've had consistently positive results on walk-in and social events. The corporate events really recovered late in Q4.

When we were last on the phone with you, we had October data, it wasn't very positive, candidly, but it really recovered quickly. We are seeing increased interest in leads and activity in corporate. We're confident, but the business at Topgolf did start down on a same-venue sales basis in Q1. But obviously, we gave you Q1 guidance and we expect it to be down almost slightly for Q1.

So, feel good about the trends there. We've seen this already kind of play out in the U.K., and there's some volatility that we'll work through in Q1, and Brian mentioned that as well. But we feel very confident on the full-year numbers. And then the next question was on Golf Equipment in Q1.

And I don't know that we're breaking out by segment relative to quarter. We are expecting every segment to grow but I don't think we're breaking out Golf Equipment in quarter. Part of the issue there, Alex, is there's just a lot of volatility on -- we have very good bookings in our Golf Equipment and our Apparel, Gear, and Other. We don't believe we have a demand issue.

And the supply is coming, but ability to forecast exactly when that will arrive and make it through DCs, etc., you could see some of that move into Q2 or Q2 move into Q1. And it looks like a big shift, but it's not a material shift on a full-year basis, just a quarterly bit of noise. But we feel very good about the Golf Equipment business.

Alex Perry -- Bank of America Merrill Lynch -- Analyst

That's really helpful. Best of luck going forward. Thanks.

Operator

We have our next question from Mike Swartz. Your line is open.

Mike Swartz -- Truist Securities -- Analyst

Hey, good afternoon, guys. I just -- and I apologize if I missed this. But maybe Chip, could you give us a view of what you expect retail sales for the golf equipment industry to do in 2022? You're coming off to obviously two big years. And I just -- I think there's some sense that -- or maybe you can't repeat it.

But maybe just if you can give us high-level thoughts around retail?

Chip Brewer -- President and Chief Executive Officer

Sure. Mike, they've been saying we can't hold it or repeat it, but it keeps coming. So, at some point, know how beautiful the strategy, you need to look at the results. And the market did level off in the second half of 2021.

as other activities, etc., were available, but the demand remained very strong for golf, and we're expecting golf to be strong going into this year. Where we're even more confident is that our golf business will be up given the strength of our buying for this year, inventory at retail, but the structural shifts around golf that have been over the last several years are pretty significant. There's a lot of momentum and enthusiasm. Of course, golf is [Inaudible] new impact.

Hybrid and remote work are not going away. We're optimistic about the golf markets overall and confident in our business.

Mike Swartz -- Truist Securities -- Analyst

Thanks for that, Chip. And just second question on capital allocation. You bought back some shares in the fourth quarter. I think this is first or second time you bought back shares in a long time and made some comments on the capital needs at Topgolf being less than what you previously anticipated.

So, maybe give us a sense of -- does that free up more capital to be allocated toward buybacks, M&A, debt reduction than maybe you thought previously?

Chip Brewer -- President and Chief Executive Officer

Well, clearly, we have a lot more liquidity than what we would have -- if you talked to us a year ago, we wouldn't have in our wildest dreams expected to deliver the financial results that we did, and our capital structure matches that. I mean, we have $200 million less to put into Topgolf. We have $700 million of available liquidity. Only $70 million more needed to go to Topgolf based on our current forecast.

Yes, we are in a much stronger position. As a policy, we don't comment on intentions for existing plans or new plans on stock buybacks. We don't comment on M&A. It's essentially a capitalization question.

So, our capital allocation strategy is unchanged. We, first and foremost, reinvest back in our business, and we've done that unabashedly for 10 straight years with pretty good effect. We've got a lot of nice opportunities to high ROI projects. We're blessed that way.

After that, we balance debt repayment, returning capital to shareholders, and selective acquisitions. Our first focus is to make sure we hit our leverage expectations and we are ahead on that. And then selectively or opportunistically, we evaluate share repurchases like the when we announced in December and executed against. And so, we'll continue to act as we have, and we're not at liberty to discuss any more specifics at this point.

Mike Swartz -- Truist Securities -- Analyst

Understood. Thanks, guys.

Chip Brewer -- President and Chief Executive Officer

Thank you.

Operator

We have our next question from Joe Altobello. Your line is open.

Joe Altobello -- Raymond James -- Analyst

Thanks. Hey, guys, good afternoon. A couple of questions on Topgolf. First, the pace of venue opening.

Obviously, you did nine last year. You're looking at 10, potentially 11, this year. What's the gating factor on that pace? Why can't you do 15 or 20, for example?

Chip Brewer -- President and Chief Executive Officer

Well, these are very long-lead-time items, Joe. So, we're harvesting the fruits of labor from prior to our merger. And team is clearly ramping that up as well. Like everything in our business as we continue to grow and reinvest.

We're balancing the risk of moving faster with not getting it right. And at present, I think we're balancing it pretty well. We're also continually investing to increase our capabilities. So, you correctly heard us when we're saying we're going to do 10 with the potential to do 11.

So, you'll see us open these things in a proven and predictable manner. It's a repeatable model. We do have a strong pipeline, but we're working right now on '24 and '25 venues, right? So, our ability to impact '22 venues wasn't in the recent past. And you'll see that we are continuing to be what I think is prudent in our investments and our development cycle.

Joe Altobello -- Raymond James -- Analyst

Got it. OK. Totally understood. I was actually thinking beyond '22, but I get it.

I guess second question on supply chain. You were actually pretty constructive on the last earnings call about supply chain and talking about things getting better. How has that progressed in Q4 and here into Q1? Are things still getting better at this point?

Chip Brewer -- President and Chief Executive Officer

Yes, Joe. In short, they are. The supply chain and [Inaudible] side of businesses -- everybody should buy your ops person's lunch at some point this year because they are definitely playing whack-a-mole as they're dealing with one issue after the next. If it's not a labor shutdown, it's a supply shortage, whether it's semiconductors or a chemical needed for your urethane covers or the logistics challenges of getting containers or getting through a terminal somewhere, and the teams continually work through that.

But the supply chain is continually improving. We've been ramping up capacity there. You don't always see that because it's being offset by some of these challenges from time to time. But through focusing on the Golf Equipment side, Vietnam is operating well right now, China is just coming back from Chinese New Year.

The return of employees is always an interesting question and it's returning well. We're not going to be completely out of the woods on supply chain, but we've shown we're going to be able to manage it very well. And at present, we're very confident on the supply chain side.

Joe Altobello -- Raymond James -- Analyst

OK. Great. Thank you.

Operator

We have our next question from Daniel Imbro. Your line is open.

Daniel Imbro -- Stephens Inc. -- Analyst

Yes. Hey, guys, thanks for taking questions. Chip, maybe one on the sales side, as you look at '22, I guess, first on the Apparel business, you mentioned, I think Jack Wolfskin was up year over year. Travis has momentum.

Can you maybe talk about prebooks for this year? I guess now it's probably the time green grass is ordering all '22 collections. So, Kind of curious, any early indications on not only the spring apparel but maybe the back half of the year and how your customers are planning for the consumer just given the inflationary backdrop. Are you seeing any signs of weakening preorders for the rest of the year?

Chip Brewer -- President and Chief Executive Officer

No, Daniel, just the opposite. So, our pre-books are excellent, and across all of our businesses. We're global. So, this is a -- we can go through -- specifically TravisMathew, that business is pre-books.

I don't think they have them finalized for the fall. They were a little bit later than Jack Wolfskin. Jack Wolfskin's aren't finalized for fall, and they're very strong. The TravisMathew business has been just performing exceptionally.

The brand momentum there is amazing. And not does not appear to be a demand issue.

Daniel Imbro -- Stephens Inc. -- Analyst

Got it. And I guess a follow-up on the Apparel business. I know it's less of a focus today, but -- in terms of Jack Wolfskin, we're still kind of in the middle, I think, of the profitability turnaround. Is that a fair characterization? Or where are we on the path you guys laid out toward $50-plus million from that asset plus synergies? And I know it's been a tough time with COVID, but as you learn more about that business Chip, do you still have the same confidence that it makes sense as part of your portfolio? And how are you thinking about the overall house of brands you've built?

Chip Brewer -- President and Chief Executive Officer

You know, Daniel, we feel even more confident on that $50 million-plus synergies now. The new team there and the momentum of that business, it has been challenging for them. I mean, probably as difficult a business operating environment as any in our portfolio as their base in Central Europe and Central Europe retail was shut down to start the year, to end the year, it's still kind of down. It just fits and starts for them, but still, they deliver growth year over year, and they were profitable.

And so you can really sense the brand momentum there, their sell-through, their pre-books. It's just an excellent business. The -- and it fits within our portfolio from the perspective of the synergies that it delivers overall across our Apparel, Gear, and Other segment and how those all play together. It's becoming a very significant business in and of itself.

And again, I think this is something that we'll get a little bit more into at the Analyst Day later in Q2. But we're very -- as you can tell, I'm very pleased with the team there. The results that they've driven in the environment that they are operating in are just exceptional.

Daniel Imbro -- Stephens Inc. -- Analyst

That's great. And just to clarify there, Brian, you quantified top cost EBITDA. And, Chip, you just laid out the path to $55 million at Jack Wolfskin -- 

Chip Brewer -- President and Chief Executive Officer

Yes. I said I was more -- I was highly confident in the $50 million-plus.

Daniel Imbro -- Stephens Inc. -- Analyst

Where was Jack Wolfskin in '21? Have you guys quantified that number to what base for growing to get to that $50 million-plus?

Chip Brewer -- President and Chief Executive Officer

We don't give you a '21. We'll evaluate that for Analyst Day, but we're not breaking out individual businesses within segments, and etc., at this stage.

Daniel Imbro -- Stephens Inc. -- Analyst

OK. Thanks so much.

Operator

We have our next question from Susan Anderson. Your line is open.

Susan Anderson -- B. Riley Financial Inc. -- Analyst

Hi. Good evening. Thanks for taking my question. I was wondering if maybe you could talk about how much you're raising prices on average for the Golf Equipment Business in the ball and then also if you expect units to grow this year over year.

And then I'm just curious, is there still -- do you think there's still a lot of restocking to be had at wholesale?

Chip Brewer -- President and Chief Executive Officer

Susan, it's Chip. So, we're not going to break out units versus price for you across -- partly because guessing as I look at across all of the segments. But I'm guessing that units are up, as well as price across. But it's -- now you're combining golf balls, clubs, etc., it -- not how we generally look at it.

But the -- we are taking price as needed. We're expecting margins to be solid, if not improved, next year. And so, I think that might answer part of your question. What was the other part that I might be missing?

Susan Anderson -- B. Riley Financial Inc. -- Analyst

Just are you guys -- are you giving -- I guess just on the pricing, are you selecting price increase and then restock at whole value?

Chip Brewer -- President and Chief Executive Officer

Yeah, it really varies. So, like, Susan, so average price increase, I don't have it, but we're up $2 on a dozen Chrome Soft golf balls, we're up sometimes on the fairway wood. We're up $50 on a fairway wood. We're $20 on a driver.

So, it really varies. And we've taken some pricing in the middle of launch when product is already in the field, and most of the new product, we're not getting any pushback on it. So, I don't have a percentage for you, unfortunately. And then on the inventory restocking, we're highly confident.

I mean, if months on hand is [Audio gap] showed it has three months on hand for industry clubs at the end of the year versus 5.2% in 2019. And 2019, that 5.2% was not a high number.

Susan Anderson -- B. Riley Financial Inc. -- Analyst

OK. Great. That's helpful. And then just curious on the core Golf and Apparel business, it looks like EBITDA margins this year, you're expecting to kind of be back to that 2019 level range.

I guess is there nothing that's changed there in terms of just promotions coming down or pricing realization that would drive those higher?

Brian Lynch -- Chief Financial Officer

Susan, this is Brian. If you look -- we'll talk about op margins just for now. But yes, next year, we'll be expecting increases in op margins in the soft goods business really across all three business segments, the equipment business, and the Topgolf business. And it's just better gross margins, to Chip's point, some of the pricing, the pricing will cover -- the pricing and volume will cover the -- any inflationary pressures that we see and you'll see the better gross margins and it will flow through.

Susan Anderson -- B. Riley Financial Inc. -- Analyst

Great. And that's versus 2020, you mean, or 2019?

Brian Lynch -- Chief Financial Officer

Versus 2021.

Susan Anderson -- B. Riley Financial Inc. -- Analyst

The increase over 2021? Yeah? Versus 2019? 

Brian Lynch -- Chief Financial Officer

Yeah.

Susan Anderson -- B. Riley Financial Inc. -- Analyst

OK, great. Thanks so much, you guys. Good luck this year.

Brian Lynch -- Chief Financial Officer

Thank you, Susan.

Operator

We have our next question from John Cernon. Your line is open. John Cernon, your line is open. You may ask your question.

Unknown speaker

Hey, can you hear me now?

Chip Brewer -- President and Chief Executive Officer

We can hear you now.

Unknown speaker

OK. Good. Well, congrats on a strong year, finishing that out. I guess a lot has been answered about the model and the growth.

Just curious in 2022, Brian, the impact of inflation at a product cost level in food, at Topgolf labor, supply chain costs for the Golf and Apparel business, [Inaudible], how much of an inflationary impact are you looking at in 2022?

Brian Lynch -- Chief Financial Officer

We haven't quantified it, but it's definitely there. It's just that we've been -- as we did in 2021, we've been able to outrun it during the year with the volume increases. And then this year, we also have the ability to outrun it for next year as well. I think you'll see a little bit more of an impact on gross margins, maybe at Topgolf, but they're mostly covering it and their gross margins are so strong.

So, it's -- approach flat. The labor is definitely something they felt as far as pricing. But at the same time, the number of people they're offsetting some of that. So, they've been more profitable this year.

We said we don't think it can sustain at those levels. So, it will get a little bit lower. But at the same time, all three businesses we'll be able to cover.

Unknown speaker

Understood. Just my final question is just on the venue-level EBITDA for Topgolf has been above expectations since you announced the deal. Just curious what you think the upside driver to expectations is in 2022? Is it really just the top-line recovery and traffic recovery? What more do you see in the margin profile of Topgolf at a venue level to move that higher as we get into 2022 and '23? Is it just leverage in the model from increased sales? Or is there more to it?

Chip Brewer -- President and Chief Executive Officer

John, that's a great question. And certainly, we're increasing confidence on same venue sales ability to drive some real positive numbers there, and we're still recovering, right? So, last year, we delivered 95%, which is wildly above our expectations. Corporate events really haven't come back. We're convinced they're going to be back, and that's a big area for gas in the tank.

We can deliver better operating margins overall there over the long term than what we initially thought. And then we'll give you a little more color on all this at the Analyst Day. So, hopefully, make that, and we'll try to walk you through a little bit more specifics on.

Unknown speaker

Sounds good. Will love to come out to California and see everybody. Thanks for taking my questions.

Chip Brewer -- President and Chief Executive Officer

Thank you.

Operator

Our next question from George Kelly. Your line is open.

George Kelly -- ROTH Capital Partners -- Analyst

Hi, everybody. Thanks for taking my questions. So just two quick ones for you. First, another Topgolf question.

So, internationally, still not a whole lot of venues, I think it's something like eight venues internationally. Wondering how quickly do you expect that to scale? And is there any consideration to opening any of those venues yourselves?

Chip Brewer -- President and Chief Executive Officer

Good question, George. So, we expect to open three new venues this year, one of which we're highly confident because it opened in January and is doing really well. And that one is in Germany. And then we announced, I believe it was yesterday that we're doing one in Glasgow, Scotland and that will be an owned venue.

So, it will be in the international portfolio but is consistent with the other venues that we've opened in the U.K., which are actually legacy venues that will be owned and operated. And then there's one more planned for the balance of the year later in the year. And then we're going to be ramping it for there. So, you'll see increasing activity on that, and this will probably sound familiar, but it's tuned for the Investor Day where we'll give you a little bit more color on perhaps mid- to long-term outlook in terms of openings.

COVID has been more of a factor even internationally than it has been in domestic operations as we ramped up with these franchisees. And -- you know, so we're seeing good activity there and developing that well. But it will scale a little later there than what we originally thought. But we do have some nice activity for this year.

George Kelly -- ROTH Capital Partners -- Analyst

OK. Great. And then second, [Inaudible], I wanted to ask about is TravisMathew. So, the growth that you've had there has just been remarkable.

So, curious, how do you keep that going? And maybe if you could talk about your expectations for new stores and expectations for growing that brand outside of Golf? Just wondering how that's going?

Chip Brewer -- President and Chief Executive Officer

Well, it's interesting, George, because I view that brand is outside of Golf already. It's really a Lifestyle Apparel brand. It has its roots in Golf, but -- it's what we wear to the office. It's what you were after golf when you go out and socialize.

You go into their stores and you're buying hoodies and cloud collections, essentially fleece, and outerwear. That's one of the things that I really loved about the brand when I looked at it because the scale and potential of that business is way above golf. It studied the Golf brands in the Apparel space for some time. And candidly, they don't get very big.

This business is getting big fast. And we give you some of those metrics. But 65% same-store sales. That's pretty good.

And it's got a lot of runway. It's selling through on the East Coast. It's selling through on the West Coast. I think we added 10 stores last year.

We had 29 open. The payback on those stores is really good, and you'll see us continue to add stores. It's got a nice direct-to-consumer model, but then it's also doing extremely well with its wholesale partners. Great success story, but you should not be thinking about it as a Golf brand.

You can think about it as roots to Golf. But just as with Topgolf, OGIO way beyond the audience of just golfers.

George Kelly -- ROTH Capital Partners -- Analyst

Understood. Thank you.

Operator

We have our next question from Casey Alexander. Your line is open.

Casey Alexander -- Compass Point -- Analyst

Yeah, good afternoon. I know this call is getting long in the tooth, so I'll just keep it to one question. Looking at your guidance for Topgolf of $1.5 billion for 2022, that's just, on the numbers compared to 2021, really solid growth. And yet, with five to six stores opening in the fourth quarter of 2022, why shouldn't we be thinking of 2023 as a year of accelerating growth for Topgolf?

Chip Brewer -- President and Chief Executive Officer

Casey, I think you bring up a good point.

Casey Alexander -- Compass Point -- Analyst

That's all my questions. Thank you.

Chip Brewer -- President and Chief Executive Officer

Thanks, Casey, and sorry, we started late.

Casey Alexander -- Compass Point -- Analyst

That's OK.

Operator

We have our next question from Rudy Yang. Your line is open.

Rudy Yang -- Berenberg Capital Markets -- Analyst

Hey, guys, thanks for taking my questions. I guess just firstly, can you just kind of comment to how you think rising interest rates could affect your business in any way, if at all? And how your industry has historically fared in a higher rate environment?

Chip Brewer -- President and Chief Executive Officer

Good question, Rudy. I don't really -- obviously, I guess I've got to turn it to you, Brian. I don't even know how much of our debt is -- exactly what percent is fixed versus not, but --

Brian Lynch -- Chief Financial Officer

I don't know the exact percentage, but it would affect us as with rising interest rates, all the term loan Bs and everything would be affected. But would be some incremental cash, but it wouldn't have a big effect on our business.

Chip Brewer -- President and Chief Executive Officer

We haven't seen -- Rudy, part of the reason you're hearing we don't know because we don't think we're that sensitive to it. When we -- this business does well throughout raising rates and lower rates, it does better in any business will in a good economy versus a weak economy. But it does find in a -- I've been in the Golf Equipment business for 20-plus years, been around Topgolf for more than 10 years, and it's -- these businesses are not highly sensitive to interest rates or they're not even highly sensitive to economic cycles, although they, of course, will have some sensitivity there.

Rudy Yang -- Berenberg Capital Markets -- Analyst

Awesome. I'll leave it at that. Thanks, guys.

Chip Brewer -- President and Chief Executive Officer

Thank you.

Operator

There are no more questions at this time, and I will turn it back over to Chip Brewer, our president and chief executive officer.

Chip Brewer -- President and Chief Executive Officer

All right. Well, I want to thank everybody for being on the call today. As you can tell, we're very pleased with our business, and we look forward to seeing you at the Investor Day, which more details will be forthcoming. And again, we apologize for the technical difficulties and the late start.

Appreciate you hanging with us, and talk to you soon.

Operator

[Operator signoff]

Duration: 69 minutes

Call participants:

Lauren Scott -- Director of Investor Relations

Chip Brewer -- President and Chief Executive Officer

Brian Lynch -- Chief Financial Officer

Randy Konik -- Jefferies -- Analyst

Alex Perry -- Bank of America Merrill Lynch -- Analyst

Mike Swartz -- Truist Securities -- Analyst

Joe Altobello -- Raymond James -- Analyst

Daniel Imbro -- Stephens Inc. -- Analyst

Susan Anderson -- B. Riley Financial Inc. -- Analyst

Unknown speaker

George Kelly -- ROTH Capital Partners -- Analyst

Casey Alexander -- Compass Point -- Analyst

Rudy Yang -- Berenberg Capital Markets -- Analyst

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