topgolf business plan

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Why Topgolf’s Business Model Is A Hole In One

BY Manouk Akopyan

Bright lights, brassy beats, billowing bars and the bare pleasure of launching a ball into the night—Topgolf is not your grandfather’s driving range.

In a handful of years, Topgolf has turned the glorified game’s grandeur on its head and reimagined sports, and in essence, flipped the traditional driving range model to create a new high-tech entertainment category for millennials.

And it’s just getting started for the rapidly expanding, natively social brand. In September, the chain secured $275 million in funding to facilitate its aggressive expansion plans throughout the US. Topgolf plans to build 7 to 10 locations a year with its sights set on 50 US locations by 2017.

Their roots are originated in Watford, England, the location where they first started serving a digital golf audience in 2000. They quickly expanded stateside shortly afterward and have since grown to 29 venues and serve 13 million guests annually.

With golf courses around the country accelerating toward a decline , those numbers are even more impressive considering the amount of golfers in the US has dropped 20 percent, from 30 million to 24 million since 2005, according to the National Golf Foundation .

With its nightclub-like vibe, Topgolf is far from being a ghost town. It’s the closest thing to unearthing the next Happy Gilmore.

Susan Walmesley , vice president and sales and marketing for Topgolf, joined [a]listdaily to discuss the fast-growing company’s aggressive strategy in building a unique integrated entertainment and sports experience.

How do you describe a Topgolf experience for someone who has never had one? 

The games can be played by anyone—any age or skill level. Players use real golf clubs and hit microchipped golf balls, aiming for giant targets on a 215-yard outfield. In the classic Topgolf game, the farther the target and the closer to the center of the target you hit, the more points you score. Your yardage and score is instantly relayed to a TV screen in your hitting bay. The hitting bays are covered and climate-controlled for year-round comfort. While you play, you can enjoy music and delicious food and drinks brought to your bay. Each venue offers other entertainment options, such as pool tables, shuffleboard and Xbox Kinect. The venues also offer golf instruction, leagues, tournaments, kids-only events, theme parties and more. There’s something for everyone.

How does Topgolf intersect with the traditional sport’s elements?

Topgolf is a great entry point for traditional golf. People who might not otherwise pick up a club jump right into playing at Topgolf because the environment is fun, casual and non-intimidating. We offer golf instruction for all ages to help promote that transition to green grass.

Who is the demographic you are trying to reach?

Topgolf appeals to all ages, but the majority of our guests are ages 18-to-34. Female visits have increased by 13 percent in the past three years, and we are excited to see that fan base grow for us. Approximately 32 percent of Topgolf players are women.

How are you leveraging a purely social approach to further build on your brand? How do you judge the success?

Topgolf is an inherently social and shareable experience because of the interaction the environment fosters. In fact, the average group size is four people. With our private-events business, we bring together diverse groups of people who bond over the playful competition. The majority of our visitors are non-golfers, and they are eager to share photos and videos of their swings on social media. We make sure that we engage with our guests online and remind them to interact with us on social media through in-venue advertising, our social wall that populates near real-time content, step-and-repeat photo backgrounds, Snapchat geofilters, and more. Topgolf’s popularity was largely built on word of mouth and social media. We judge our success on social based on quality and quantity of engagement activities with likes, comments, shares, retweets, follower growth, referrals to Topgolf.com and several other KPIs.

What is Topgolf’s approach to social? Are there any platforms you’d like to test further?

Up until this year, we had a decentralized marketing model in which each venue had its own social media accounts. This year, we faced maintaining more than 150 accounts and decided that it would be best to post from only one main corporate account on Twitter and Instagram. The venues will maintain their Facebook accounts so they can still share local content and guests can ‘check in’ locally. Our new approach will help us track and respond to guest service issues as well as share higher-quality content. We are excited to explore Snapchat further in the near future. We’ve experimented with geofilters and have had huge success with them, so the next step is creating our own Snapchat account to share the Topgolf experience.

What is your approach and strategy in telling the Topgolf story? What works? What hasn’t?  

Topgolf has gained significant brand awareness through earned media. Our story has evolved so much over the years—we started off focusing on being a really cool driving range then evolved to become a sports entertainment venue. Our relationships and partnerships within the golf industry have evolved over time as the industry grew to embrace Topgolf for how it could help grow the game. This year, we are thinking beyond the venues to foster Topgolf as a lifestyle brand that fans can tap into in-venue or online. In terms of PR, we find it’s critical for reporters, tastemakers and influencers to experience Topgolf firsthand so they can help tell the story from their unique perspective. It’s hard to explain Topgolf to someone who has never heard of it—visuals are necessary to tell our story and convey all that we offer.

Topgolf recently secured $275 million in additional capital to execute an expansion plan across the US. Where will we be seeing new Topgolf locations?

We are opening in Jacksonville this month and Edison, New Jersey in December. Next year, we will be opening in Charlotte, Orlando, Nashville, near Indianapolis, near Philadelphia and in Fort Worth. In 2017, we will also open our first location in Australia.

Which of your current markets have been performing the best? And why?

Our Centennial venue near Denver is a top performer. The Denver culture embraces outdoor recreation activities, and Topgolf is a place where you can play outside year-round. Our Tampa venue is another high-performing location. Its food and beverage sales have broken company records; there aren’t as many casual dining restaurants in the vicinity as some of our other venues. Our Scottsdale location usually leads the pack in terms of our private events business because its tourism industry is so strong. And of course, Las Vegas is our flagship venue that opened this year and is performing extremely well. It features swimming pools, a concert venue, a Callaway fitting studio, a retail shop and many amenities that aren’t available at our other venues.

Is there a non-location-specific experience you’re looking to offer? Or is it only for fans within a region?

We are actively working on creating a Topgolf experience that can be enjoyed in markets where we don’t yet have a location. There will be more details to come on that soon. Our fans can also play Topgolf 24/7 on the WGT Golf app . The game is incredibly realistic and has gotten rave reviews.

Where do you see Topgolf in five years?   

I see Topgolf moving beyond being a great brand to becoming a noble brand. We are focusing more than ever on giving back to charity and helping grow the game of golf. In five years, I also believe Topgolf will be a household name regardless of location. Topgolf has always been a digital-first company, and I’m excited to see how we will innovate and personalize the guest experience as technology advances.

Follow Manouk Akopyan on Twitter  @Manouk_Akopyan

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Topgolf Business Model: Unveiling the Success Behind the Swing

Updated: May 14

Welcome to the immersive world of Topgolf, where entertainment meets golf in a revolutionary way.

In this article, we'll delve deep into the Topgolf business model, uncovering the elements that contribute to its unparalleled success. Drawing on my experience as a former consultant at both MBB and Big4, I'll dissect the revenue streams and highlight what makes this business truly exceptional.

Table of Contents

What is topgolf, what makes topgolf unique, topgolf in numbers, how topgolf makes money, topgolf venues business model, expansion and global impact, topgolf consulting services.

Topgolf is a premier entertainment and sports venue that combines the traditional game of golf with cutting-edge technology and a social atmosphere. Unlike conventional golf courses, Topgolf offers a unique experience where players aim microchipped golf balls at giant targets on an outfield.

The facility uses advanced tracking technology to score each shot, turning the game into a point-scoring and interactive experience. With a focus on inclusivity and entertainment, Topgolf appeals to both avid golfers and newcomers, making it a popular destination for social gatherings, corporate events, and family outings.

Topgolf enjoys a significant advantage by providing climate-controlled and heated hitting bays, enabling golf enthusiasts to play in every season. This unique feature ensures year-round accessibility, allowing people to enjoy golf even in unfavorable weather conditions like snow. For avid golfers, this presents an excellent opportunity to continue their training during the winter months.

Topgolf stands out as a unique concept that has successfully blended golf's social and sporting appeal with cutting-edge technology. This innovative approach has expanded the allure of Topgolf beyond traditional golf enthusiasts, capturing the interest of both golfers and non-golfers alike.

Here are five key factors that contribute to Topgolf's exceptional success:

Social Aspect

Topgolf goes beyond traditional golf by adopting a family-friendly approach and offering a vibrant nightlife experience. Nearly half of its guests identify as "non-golfers," showcasing its broad appeal beyond the conventional golfing community.

Contrary to its traditional image as an elitist pastime, golf has shed its stuffy reputation and become undeniably cool. The conventional association of polos and khakis at exclusive country clubs no longer defines the sport's aesthetic. This shift can be largely attributed to a pandemic-induced surge, expanding golf's appeal and drawing in individuals from diverse cultural and economic backgrounds who were once excluded from the golfing scene.

Millennials, in particular, have embraced golf with enthusiasm, drawn to live events featuring DJs, a dynamic sports atmosphere, and a diverse menu of excellent food and drinks. In this regard, Topgolf stands out as a prime destination, offering a blend of entertainment, social engagement, and culinary delights that align perfectly with the evolving preferences of the modern generation.

Topgolf Open 2023

The pinnacle of this surge in popularity climaxed at the recent Topgolf Open, a glittering event in Los Angeles commemorating the city's hosting of the U.S. Open Championship for the first time in 75 years. This gathering emerged as the premier golf celebration of the year, showcasing Topgolf's extensive influence by drawing almost every notable figure connected to golf in Southern California.

Moreover, the event underscored the significant expansion of the game by attracting iconic skaters, elite athletes, and the renowned LA graffiti artist OG Slick, who painted a monumental mural at Topgolf's El Segundo location. You can catch the highlights below, courtesy of COMPLEX :

The Entertainment Experience Reinvented

Topgolf delivers a comprehensive entertainment package beyond the average consumer's expectations. Topgolf revolutionizes the golfing encounter by introducing innovative formats such as the Angry Birds game and providing diverse entertainment facilities. This strategy ensures that Topgolf remains pertinent in the ever-changing landscape of the golfing world.

Turning Challenge into Opportunity

Overcoming the challenges of traditional golf, Topgolf provides an easily accessible and affordable format for both golf enthusiasts and casual players. National Golf Foundation (NGF) notes that while traditional golf metrics trend negatively, Topgolf's approach has created a positive scene, countering issues of accessibility and affordability.

Information from Topgolf Callaway Corp (from November 2021) indicates that the average cost per visit/person to Topgolf is $36. This cost, when compared to other entertainment venues such as Six Flags, musicals, or fine dining restaurants, is relatively moderate and does not stand on the higher end of the spectrum.

Competition

High-tech features, including RFID Technology for tracking shots, make Topgolf ideal for friendly competition. The array of games available caters to a diverse range of abilities, ensuring that even those who aren't skilled golfers can enjoy the experience.

Topgolf Callaway Brands Corp. (referred to as "the Company" or "Topgolf Callaway Brands") ( NYSE: MODG ) has disclosed its financial outcomes for the fourth quarter concluding on December 31, 2023.

Let's deep dive into the figures for Topgolf.

Topgolf Key Metrics & Outlook

Topgolf Callaway undergoes diversification, branching into three distinct segments: Topgolf, Golf Equipment, and Active Lifestyle. Our primary focus will be on assessing the performance of Topgolf.

The Company experienced a 5.4% surge in net revenues, attributed to the positive revenue growth observed across all operating segments. Notably, there was a 7% increase in revenue for Topgolf, a 5% rise in the Golf Equipment segment, and a 3% uptick in the Active Lifestyle segment.

Specifically focusing on the Topgolf segment, revenue witnessed a noteworthy increment of $29.5 million or 7.2%, reaching $439.0 million, predominantly propelled by the addition of new venues. Despite an anticipated -3% Same Venue Sales, the actual performance surpassed expectations, attributed to the robust showing in our 1- and 2-bay consumer business.

Moreover, the Segment's operating income experienced a significant boost of $20.6 million, reaching $23.1 million. The Segment Adjusted EBITDA also saw a substantial increase of $30.0 million, marking a remarkable 69.4% rise to $73.2 million. These improvements were primarily a result of increased revenues and enhanced operational efficiencies within the venues.

In summary, after the challenging year of 2019, greatly affected by the COVID-19 pandemic, Topgolf's revenue has demonstrated a steady and remarkable upward trend, achieving a record-breaking $4.28 billion in 2023.

Topgolf Venue Economics

Topgolf features two types of venues, classified as Small-Medium and Medium-Large. The primary distinction between small, medium, and large venues is the number of hitting bays each venue offers. However, it's worth noting that large venues may also have additional space, potentially accommodating more events.

According to Topgolf Callaway, the size of venues is measured as follows:

Large Venue

Target population of >1MM in 25 min catchment

100+ bays across three floors

Example: Las Vegas, NV

Medium Venue

Target population of 500K-1MM in 25 min catchment

70 - 100 bays across 2-3 floors

Example: Baton Rouge, LA

Small Venue

Target population of 200K-500K in 25 min catchment

30-60 bays on a single level powered by Toptracer

Example: Chattanooga, TN

For simplicity, let us refer to them as small and large venues. As indicated in the revenue report, Topgolf Callaway also classifies venues into two categories: Small-Medium and Medium-Large.

The majority of Topgolf venues fall into the category of large venues. The cost for small venues typically ranges between $20-27 million, whereas the expense for large venues can begin at $30 million and extend up to $40 million. The venue revenue ranges from $13-18 million for small venues, while for large venues, it varies between $20-28 million.

Notably, the estimated payback period stands at an impressive 2.5 years, as indicated by Topgolf Callaway Corp. This factor positions Topgolf as a potentially excellent investment, provided that all factors align favorably.

Topgolf Venue Count

The primary revenue source for Topgolf is its venues, and their growth rate is notably rapid. As evident in the table above, over the past three years, an average of approximately 10 venues opened annually in the US.

By the close of 2023, the total number of venues reached 89. It is reasonable to anticipate that they may reach the milestone of 100 venues by the end of 2024 or the first quarter of 2025.

Out of the total 89 venues in the US, approximately 76% (68 venues) are owned and operated directly by Topgolf Callaway Corp. The remaining 21 venues operate under a franchise system.

Topgolf's business model is segmented into three primary categories: Topgolf Venues (Incl. Swing Suite), Toptracer, and Topgolf Media. The predominant share of revenue is generated through Topgolf Venues.

Topgolf Venues

A Topgolf venue is a specialized entertainment facility that combines elements of golf with cutting-edge technology to create a unique and engaging experience. At a Topgolf venue, guests can enjoy a variety of golf-based games in a social and vibrant atmosphere.

The venues typically feature a multi-level driving range with individual hitting bays equipped with high-tech sensors and microchipped golf balls. Players can take shots at targets on the range, and the technology accurately tracks the distance, accuracy, and speed of each shot. This data is then used to score the games and provide feedback to the players. The venues are designed to cater to individuals of all skill levels, from seasoned golfers to those trying golf for the first time.

In addition to the golfing experience, Topgolf venues often offer a range of amenities, including bars, restaurants, and event spaces. This creates a social and entertainment-focused environment, making Topgolf a popular destination for friends, families, and corporate events. Overall, a Topgolf venue aims to provide a dynamic and enjoyable experience beyond traditional golfing.

Topgolf Swing Suite

Topgolf Swing Suite is an immersive virtual experience that brings the excitement of Topgolf to various settings, such as hotels, resorts, and entertainment venues. It offers a state-of-the-art simulator where participants can enjoy a range of virtual games, including golf, baseball, football, and zombie dodgeball.

The technology accurately replicates the feel of a real sports environment, allowing users to take swings, throws, or kicks and see the impact in the virtual world. Topgolf Swing Suite provides an entertaining and social experience, making it suitable for various occasions, from casual hangouts to corporate events. It enhances the accessibility of Topgolf's interactive and engaging entertainment beyond the traditional Topgolf venues, extending the brand's reach to new and diverse audiences.

Toptracer Technology

Toptracer technology represents an advanced ball-tracking system employed in golf. It offers real-time data and analysis of a golfer's shots, utilizing high-speed cameras and sophisticated algorithms to meticulously trace the golf ball's flight path from the moment of impact to its landing. Beyond measuring essential metrics like ball speed, distance, and launch angle, the technology visually represents the shot trajectory on a screen. While Topgolf incorporates this technology within its venues, it also develops and sells it to other interested driving ranges or golf facilities.

This technology mirrors the one featured on television, displaying the trajectory, distance, and ball speed of each shot, and was showcased during +200 national TV broadcasts every year. Additionally, Topgolf extends the use of this technology by licensing it to individual driving ranges. Currently, +700 driving ranges across +30 countries, encompassing +20,000 bays, are actively utilizing this advanced tracking technology.

Topgolf Media

Topgolf Media operates on regional, national, and global scales, tailoring packages and creating innovative opportunities to achieve diverse business objectives. This may involve organizations acquiring advertising space or partnerships with corporations, which are then showcased in Topgolf Venues and other platforms.

In summary, Topgolf Media focuses on generating original content to engage and cultivate audiences for the brand, manages the development and operations of the Topgolf app, and maintains a profitable business in the innovative media segment. Additionally, it explores e-sport opportunities, such as the PGA Tour 2023 game, and collaborates with major brands for co-marketing initiatives to reach a broader audience for Topgolf.

Interestingly, only one-third of Topgolf Venues' revenue is generated from gameplay. The remaining two-thirds come from various sources, including events, food and beverages, and merchandise sales. These venues offer a versatile and enjoyable experience, serving as ideal destinations to socialize with friends, watch sporting events like the Super Bowl, celebrate birthdays, and host corporate events.

Some Topgolf Venues go beyond traditional offerings, providing specific areas for meetings and business events. Additionally, venues may feature rooftop terraces and patios, enhancing their appeal as excellent choices for corporate gatherings and events.

Topgolf takes its culinary offerings to a remarkable standard, providing an elevated experience. With an impressive wine selection, including champagne for special events, and a diverse menu ranging from burgers and finger foods to more sophisticated options, Topgolf has become a destination for those seeking exceptional food and drinks.

Beyond traditional golfing, people frequent Topgolf primarily for its signature food and beverages, such as Golf Bag Cocktails and injectable donut holes. In essence, the entertainment factor takes precedence, with golf being a secondary consideration for many visitors to Topgolf.

Synergy with Callaway

As an integral part of the Topgolf Callaway company, Topgolf opens up synergistic opportunities with Callaway, a producer of golf accessories. Within Topgolf, Callaway Clubs are not only utilized but are also available for purchase at select venues.

The collaboration extends further, with professional golf players receiving endorsements featuring the Topgolf logo on their attire, along with commercials for Callaway showcased within Topgolf premises.

The significant exposure that Callaway receives through this collaboration, introducing the brand to a vast audience, creates a remarkable synergy between Topgolf and Callaway, offering substantial marketing benefits.

As per the National Golf Foundation's 2023 report , on-course players numbered 12.1 million, while off-course players reached 18.5 million in the United States. Considering that more than half of off-course play likely originates from Topgolf, this is a staggering figure.

With Topgolf reaching around 25% of the US population, the market penetration opportunity is evident. The introduction of golf to new players, including younger generations, women, and diverse communities, further adds to this potential, positioning Topgolf and golf itself for increasing popularity in the years to come.

Yet, the scope extends globally. Currently, Topgolf's international venue count is relatively low. Looking ahead, envisioning venues in densely populated cities worldwide—such as Tokyo, Rio de Janeiro, Istanbul, Paris, Moscow, and more—could have a significant global impact. This may lead to the possibility of world Topgolf tournaments, where champions from each venue compete on an international stage. Additionally, countries like China, India, and other Southeast Asian nations present tremendous potential.

In summary, the combined factors of market penetration opportunities and the trend of introducing new players to golf position Topgolf for substantial growth in the upcoming years, both domestically and on a global scale.

Undoubtedly, there are certain challenges. Topgolf pioneered a global trend known as "EATertainment," emphasizing venues where patrons can dine, drink, and engage in games. This innovation sparked a new market globally.

While some may draw parallels with bowling alleys, the distinction lies in the significantly higher quality of food and beverage offerings at Topgolf. Moreover, all TopGolf locations boast expansive parking lots, ensuring easy accessibility, with some even providing valet services. The venues also offer ample space for events and have gained popularity among students, given their proximity to colleges, eliminating the need for expensive transportation.

This trend has given rise to various spin-offs, with venues like Topgolf of Pickleball, Topgolf of Baseball , Topgolf of Soccer , and Topgolf of Bowling & Bocce emerging. There are even discussions about the potential introduction of Topgolf of Basketball, as well as ventures into sports like F1 and football.

Can Topgolf get Dethroned?

Predicting that people will consistently prefer golf over other sports is challenging, especially considering the widespread introduction to golf through Topgolf experiences. The market share might fluctuate if a new and compelling sports concept gains popularity. According to World Atlas , golf ranks as the 10th most popular sport globally, which opens the door for other sports to follow suit.

While challenges exist, such as the potential high cost of building Topgolf venues for sports like hockey, and the dominance of team sports in popularity, opportunities still abound for diversifying into other sports. The significance of Topgolf's Toptracer technology cannot be understated, as it enhances gameplay.

However, there remains a risk that a competitor could introduce superior technology, enabling players to explore additional functionalities. Though various risks must be considered, as of now, despite the emergence of similar venues, Topgolf appears largely unchallenged in its domain.

To dethrone Topgolf, a competitor would need to offer a significantly superior and innovative experience, addressing key aspects like venue ambiance, technology, and overall customer satisfaction. As of now, Topgolf remains a leader, but the competitive landscape may evolve in the future.

The Topgolf business model is a harmonious blend of innovation, entertainment, and community engagement. As we've explored its origins, mechanics, and prospects, it's evident that Topgolf's success is rooted in its ability to transcend the traditional golfing experience.

Whether you're a seasoned golfer or a newcomer, Topgolf offers an inclusive and captivating space that continues to redefine the intersection of sport and entertainment.

If you require consultancy for the establishment of a new Topgolf venue or an EATertainment concept, feel free to reach out to me.

As a full-time Strategy and Management consultant, I offer comprehensive consulting services, providing valuable insights, market research, and strategic guidance to ensure the success of your venture.

Feel free to utilize the contact form on this website , and your inquiries will be directed to me promptly.

FAQs About Topgolf Business Model

Is Topgolf only for experienced golfers?

No, Topgolf caters to individuals of all skill levels, from beginners to seasoned golfers. The technology and interactive games make it enjoyable for everyone.

How does Topgolf ensure customer safety during gameplay?

Topgolf prioritizes customer safety by implementing safety measures, trained staff, and secure gaming facilities to provide a worry-free experience.

Are there any age restrictions for enjoying Topgolf?

Topgolf is designed for all ages. Families, friends, and even corporate groups can enjoy a day at Topgolf, making it a versatile and inclusive destination.

What makes Topgolf different from traditional golf courses?

Topgolf distinguishes itself by combining technology, entertainment, and socializing, creating a vibrant atmosphere beyond the typical golf course setting.

Can I host private events or parties at Topgolf?

Yes, Topgolf offers private gaming suites at some venues and event hosting services, making it an ideal venue for birthdays, corporate events, and other celebrations.

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How Topgolf plans to become even bigger than actual golf

The high-tech beer, wings, and driving range experience for millennials and Gen Z is working to bring even more people into the fun.

[Photo: Topgolf]

BY  Jeff Beer 6 minute read

Two years ago, Topgolf chief marketing officer Geoff Cottrill was at a golf tournament in Jacksonville, Florida, when he and a friend were walking the course and spotted two kids laughing hysterically as they rolled down a hill. Cottrill turned to his friend and said, “If you and I did that, they’d kick us out of here.”

If you could distil Topgolf’s mission, it’s to make more golfers feel like those kids and less like Judge Smails . Topgolf’s overall aim is to get as many people as possible swinging a club, while dispelling the notion of golf as an exclusive activity. “We are going to have a massive impact on the game of golf over the next five to 10 years,” says Cottrill, and he has the numbers to back it up.

In 2022, Topgolf had more than 31 million players across its more than 95 venues, online games, and third party driving ranges using its Toptracer technology. The high-tech range experience started in the United Kingdom in 2000, expanded to the United States in 2005, and was acquired by leading golf club manufacturer Callaway in 2021 for $2.6 billion. To reflect its importance to Callaway’s future, this past year the company renamed itself Topgolf Callaway. The Topgolf side of the business makes up about 40% of the company’s overall revenue and is the growth engine: For the first half of 2023, Topgolf grew 20.5% over the year earlier period, to $874.3 million.

The National Golf Federation estimates that 41.1 million Americans played some kind of golf in 2022. Among 18-to-34 year-olds, 6.2 million players played on actual golf courses, while 5.8 million played exclusively at “off-course” venues like Topgolf. The company is adding 11 new venues this year, and expects them to bring up to four million new off-course golfers annually through its doors. Over the next five years, Topgolf expects to expand from its current 95 global locations to more than 150 and 70 million visits. 

To help in that aim, Topgolf this week is launching a new brand campaign, an extension of its previous work launched late last year, but doubling down on its ambition to seamlessly blend golf with . . . not golf. So far, as its earnings will attest, it’s working. And Topgolf is using every angle in the modern marketer’s playbook to keep it that way. 

“The first round of our brand work (this year) was all around inviting you to play, showing people what it’s like to be in one of our venues, reflecting the experience itself,” says Cottrill. “This next phase, we want to show what the fun feels like, and the spectacle that you see when you come to a Topgolf.”

Building on its “Come Play Around” campaign , the new work introduces people with hands for heads. But the Hand Heads, as Cottrill calls them, aren’t just replacing human heads with hands. “We all use our hands to express emotions every single day,” says Cottrill, who previously served as head of marketing at Converse and Coca-Cola. “You swing golf clubs with your hands. You eat wings with your hands. And this idea is about being a place where you’re expressing golf as something fun to do. I used to say that Chuck Taylors were T-shirts for your feet. Golf gloves can be the same kind of thing, a T-shirt for your hands.”

It’s a silly gimmick, yes, but one with purpose: The goal is to illustrate just how serious the brand is about making golf more fun and accessible. You don’t need a country club membership or your own clubs. For years, pre-COVID, the narrative around golf was that it was in decline due to the aging demographics of its players and its often prohibitive cost, both monetarily and in the fact that not everyone has the luxury of spending five hours playing a single round. Turns out that beer, wings, and superior driving range technology—all wrapped up in a fun, welcoming environment—has helped change that. 

Golf is also going through a bit of a streetwear renaissance , with the emergence of such brands as Malbon , Bogey Boys , and Eastside Golf . The sport also got the Netflix “ Drive to Survive ” treatment with the Full Swing documentary series , and even more than a little international intrigue with the LIV Golf-PGA rivalry-turned-merger .

Topgolf has also been ahead of the curve in merging sport and entertainment into one experience. It’s become a benchmark as other companies have begun trying to adapt it to other sports, and pitching themselves as the Topgolf of baseball , and the Topgolf of soccer . 

Cottrill says the brand’s biggest challenge isn’t about creating something that isn’t there. “Our biggest competition is ourselves, and our own imagination,” he says. “The number-one focus is making sure that our experience is as good as can possibly be. We’ve got to deliver every single day on that, no matter if you’re a scratch golfer or you’ve never held a club before. Then my biggest concern is that our brand creative work actually does that Topgolf experience justice.”

As a marketer, Cottrill knows that a modern brand must also ideally make its creative work a part of the experience. This is why Topgolf will, of course, be selling its own line of golf gloves featuring wild and stylish designs, to put that Hand Head mentality on your actual hands. It’s also why Topgolf is a featured level in the video game PGA Tour 2K . 

“We’re always looking at how our brand can show up in other places,” says Cottrill. “The 2K game is a great example of Topgolf showing up in culture on a console, Golf+ [is] another way for us to show up, in the world of Oculus. So it’s about having the brand present and bringing the brand to other places in a different form.”

More than half of Topgolf’s customers are millennials and Gen Z, which makes it an attractive collaboration partner for other brands. In February, the company signed a multiyear deal to make Honda and Acura the official automotive partners and official vehicles of Topgolf in the U.S. At the time , American Honda marketing exec Jessika Laudermilk said the move was to “align the Honda and Acura brands with the fun and excitement of the ‘golf as entertainment’ movement, which is already popular with millennial and Gen Z car buyers who rank among Topgolf’s most enthusiastic players.”

Another brand collab included a spot created with ESPN, featuring the sports giant’s hosts looking to trade their Bristol, Connecticut, rooftop for the real thing. 

We made #RoofTopgolf in Bristol a thing 👀 #ad @Topgolf pic.twitter.com/9FdBW0hIEn — ESPN (@espn) February 13, 2023

In April, the Special Olympics announced that Topgolf would become a venue for a fully sanctioned event. And in June, to help celebrate the U.S. Open’s first appearance in L.A. for 75 years, the brand hosted the Topgolf Open , a mix of celebrities, influencers, and more at a golf-inspired party . “This was skateboarding meets L.A. car culture meets street art,” says Cottrill, “all these different cultures in L.A. together just to celebrate and have fun, and Topgolf was the place to do it.”

Both of these developments are part of the brand’s strategy of using entertainment and culture to attract as many people as possible to its experience.

“We’re working to make the game of golf more accessible,” says Cottrill. “When we make the game more accessible, it becomes more diverse. When it becomes more diverse, it becomes more fun. It’s as simple as that. That’s the formula.”

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ABOUT THE AUTHOR

Jeff Beer is a senior staff editor covering advertising and branding . He is also the host of Fast Company’s video series Brand Hit or Miss   More

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Table of contents, decoding topgolfs business strategy.

• 22 February, 2024
• Startups , Swot Analysis

Understanding Topgolf

To grasp the essence of Topgolf’s business strategy, it is essential to gain an understanding of the company itself and its unique business model.

Introduction to Topgolf

Topgolf, a rapidly expanding sports entertainment company, has revolutionized the traditional golfing experience. With over 70 locations worldwide, Topgolf has attracted both experienced golfers and beginners alike, making it accessible to a diverse audience ( Yatta Golf ).

Combining elements of golf, technology, and entertainment, Topgolf offers a one-of-a-kind experience that appeals to a wide range of customers. The core concept centers around driving ranges equipped with microchipped golf balls and advanced tracking technology. These features allow players to score points by hitting targets on the range, providing instant feedback on the accuracy and distance of their shots.

Topgolf’s Unique Business Model

Topgolf’s business model is built on blending technology, entertainment, and social experiences. It goes beyond the traditional driving range by offering an array of entertainment options, including games, music, food, and drinks, all within a lively and social atmosphere. This innovative approach has made Topgolf particularly popular among millennials and younger demographics who seek a dynamic and interactive experience.

By combining driving ranges with bars, dining spaces, and event venues, Topgolf caters to a diverse customer base. It appeals not only to golf enthusiasts but also to casual visitors looking for a unique and entertaining outing. The company’s emphasis on creating a social atmosphere and offering versatile event spaces has positioned Topgolf as an attractive destination for parties, corporate gatherings, and social events.

Furthermore, Topgolf’s strategic partnerships and collaborations have played a significant role in its success. Partnerships with professional sports organizations, such as the PGA Tour, have elevated the brand and driven customer engagement through innovative marketing initiatives and collaborative events. These partnerships have helped Topgolf expand its reach and enhance its reputation in the sports entertainment industry.

In summary, Topgolf’s unique business model combines technology, entertainment, and social experiences to create a compelling and interactive golfing environment. By diversifying the customer experience, leveraging strategic partnerships, and providing innovative technology-driven features, Topgolf has successfully attracted a wide range of customers and established itself as a leader in the sports entertainment industry.

SWOT Analysis of Topgolf

To gain a deeper understanding of Topgolf’s business strategy, it is essential to conduct a SWOT analysis. This analysis examines the strengths, weaknesses, opportunities, and threats that impact the company’s performance and position in the market.

Strengths of Topgolf

Topgolf boasts several key strengths that contribute to its success as a sports entertainment company. These strengths include:

Unique and Innovative Concept: Topgolf’s interactive experience, blending golf with entertainment, has captured the attention of customers and positioned the company as a leader in the industry ( Sports Business Journal ).

Diversified Customer Base: By combining driving ranges with bars, dining, and event spaces, Topgolf appeals to a wide range of customers, from avid golfers to casual social visitors ( AListDaily ). This diverse customer base helps drive revenue growth and fosters a vibrant and inclusive community.

Social and Entertainment Appeal: Topgolf’s focus on providing a social and entertaining experience sets it apart from traditional golf facilities. The inclusion of upscale food and beverage options, such as sushi and signature cocktails, adds to the overall experience and attracts customers beyond traditional golfing demographics ( AListDaily ).

Utilization of Data Analytics: Topgolf leverages data analytics to enhance customer engagement, tailor offerings, and deliver personalized experiences. This strategic use of data helps drive customer loyalty and revenue growth.

Weaknesses of Topgolf

While Topgolf enjoys significant strengths, it also faces certain weaknesses that can impact its business strategy. These weaknesses include:

Weather Dependency: As Topgolf primarily operates outdoors, its business is susceptible to weather conditions. Inclement weather can limit the number of customers and affect revenue generation.

Limited Accessibility: Topgolf’s current locations may not be accessible to everyone, as they are primarily concentrated in urban areas. This limited accessibility may restrict potential customers and limit market reach.

Opportunities for Topgolf

Topgolf has several opportunities to further expand its business and strengthen its market position. These opportunities include:

Global Expansion: Topgolf can continue its international expansion strategy by diversifying its locations beyond traditional golf markets. By targeting countries where digital technology can bridge the gap between golf enthusiasts and fun entertainment experiences, Topgolf can tap into new markets and grow its customer base ( CIO ).

Technological Advancements: Topgolf can capitalize on technological advancements to enhance its offerings and customer experience. By incorporating innovative technologies such as virtual reality or augmented reality, Topgolf can attract tech-savvy customers and differentiate itself from competitors.

Threats to Topgolf

Despite its strengths and opportunities, Topgolf is not immune to threats that can impact its business strategy. These threats include:

Competition: The sports entertainment industry is highly competitive, with rival companies vying for market share. Topgolf must continuously innovate and differentiate itself to stay ahead of the competition.

Economic Factors: Economic downturns or fluctuations can impact consumer spending habits, including discretionary entertainment expenses. Topgolf must be prepared to adapt to changing economic conditions and consumer behaviors.

By considering these strengths, weaknesses, opportunities, and threats, Topgolf can develop strategies to leverage its strengths, address weaknesses, capitalize on opportunities, and mitigate potential threats. This analysis serves as a foundation for strategic decision-making and future business growth.

Topgolf’s Business Strategy

Topgolf has achieved remarkable success by implementing a strategic business approach that blends technology and entertainment, creating a social experience, and pursuing expansion and growth plans. These elements form the foundation of Topgolf’s business strategy, allowing them to stand out in the sports entertainment industry.

Blending Technology and Entertainment

At the core of Topgolf’s business strategy is the seamless integration of technology and entertainment. By leveraging advanced tracking technology and microchipped golf balls, Topgolf enhances the gaming experience for players. This technology provides instant feedback on players’ shots, allowing them to analyze their performance and compete with friends and family. The gamified nature of the experience, combined with the use of technology, appeals to a wide range of customers, from avid golfers to first-time players. This innovative approach has made Topgolf particularly popular among millennials and younger demographics ( Yatta Golf ).

Creating a Social Experience

Topgolf has revolutionized the traditional golfing experience by creating a vibrant and social atmosphere within its venues. Beyond the driving range, Topgolf offers a range of entertainment options, including games, music, food, and drinks. This combination of elements transforms the venue into a social hub, attracting customers beyond traditional golfing demographics. The emphasis on food and drinks, including upscale offerings like sushi and signature cocktails, enhances the overall social experience and encourages customers to spend more time at the venue. This distinctive approach has contributed to Topgolf’s appeal as a destination for gatherings, parties, and corporate events.

Expansion and Growth Plans

Topgolf’s strategic business strategy includes ambitious plans for expansion and growth. With over 70 locations worldwide, Topgolf has rapidly expanded its footprint, catering to both experienced golfers and beginners. The success of its unique interactive experience has laid the foundation for further growth. Topgolf continues to explore new markets and opportunities for expansion, aiming to bring its innovative concept to more regions and attract a diverse customer base. By staying at the forefront of technology, entertainment, and customer satisfaction, Topgolf ensures its position as a leader in the sports entertainment industry.

Topgolf’s business strategy, which combines technology and entertainment, creates a social experience, and focuses on expansion and growth, has propelled the company to great success. By continually innovating and adapting, Topgolf has positioned itself as a pioneer in the golfing industry, attracting a wide range of customers and driving revenue growth ( topgolf competitive advantage ). With a bright future ahead, Topgolf aims to make golf more inclusive and accessible while maintaining its commitment to excellence and customer satisfaction (topgolf customer satisfaction).

Topgolf’s Success Factors

Topgolf’s success can be attributed to several key factors that have contributed to its rise as a leading sports entertainment company. These factors include its focus on technology and tracking innovations, diversifying the customer experience, and strategic partnerships and collaborations.

Technology and Tracking Innovations

One of the key elements that sets Topgolf apart is its use of advanced technology and tracking innovations. Utilizing microchipped golf balls and cutting-edge tracking systems, Topgolf enhances the gaming experience and provides instant feedback to players on their shots. This technology allows players to track the accuracy and distance of their shots, providing a gamified experience that appeals to both novice and experienced golfers ( Yatta Golf ). By incorporating technology into the driving range bays, Topgolf creates an interactive and engaging atmosphere that keeps customers coming back for more.

Diversifying the Customer Experience

Topgolf understands that the success of its business relies on attracting a wide range of customers beyond traditional golfing demographics. To achieve this, Topgolf has strategically diversified the customer experience. In addition to offering a unique golfing experience, Topgolf places a strong emphasis on food and drinks, including upscale offerings like sushi and signature cocktails. This focus on culinary excellence adds to the social and entertainment aspect of the venue, making it a destination for individuals and groups looking for a fun and memorable experience ( AListDaily ). By providing a comprehensive entertainment experience, Topgolf has successfully positioned itself as a go-to destination for socializing and enjoying the game of golf.

Strategic Partnerships and Collaborations

Topgolf’s strategic partnerships and collaborations have played a significant role in its success. By partnering with professional sports organizations, such as the PGA Tour, Topgolf has not only elevated its brand but also created unique marketing initiatives and collaborative events. These partnerships allow Topgolf to tap into a broader audience and engage customers in exciting ways. Through these collaborations, Topgolf strengthens its position in the sports entertainment industry and expands its reach to reach new customers.

In conclusion, Topgolf’s success can be attributed to its focus on technology and tracking innovations, diversifying the customer experience, and strategic partnerships and collaborations. By staying at the forefront of technological advancements, providing a diverse and engaging experience for customers, and forging strategic alliances, Topgolf continues to thrive in the competitive sports entertainment market. These success factors have not only driven customer satisfaction but also contributed to Topgolf’s continued growth and overall business strategy.

The Impact of Topgolf’s Business Model

Topgolf’s unique and innovative business model has had a significant impact on the sports entertainment industry. By blending technology, entertainment, and the game of golf, Topgolf has successfully attracted a wide range of customers, enhanced the golfing experience, and driven revenue growth.

Attracting a Wide Range of Customers

One of the key strengths of Topgolf’s business model is its ability to appeal to a diverse customer base. Rather than solely targeting avid golfers, Topgolf has positioned itself as an entertainment destination that caters to a wide range of demographics, from golf enthusiasts to casual social visitors. By combining driving ranges with bars, dining, and event venue spaces, Topgolf creates a unique interactive experience that goes beyond traditional golfing. This approach has allowed Topgolf to attract families, young adults, and corporate clients, fostering a sense of community and social interaction ( AListDaily ).

Enhancing the Golfing Experience

Topgolf leverages technology to enhance the golfing experience for its customers. The company utilizes microchipped golf balls and advanced data analytics to track player performance, providing real-time feedback and valuable insights. This technology-driven approach not only enhances engagement but also allows players to improve their skills and compete in a fun and interactive manner. By incorporating technology into the golfing experience, Topgolf has created a unique and immersive environment that appeals to both golf enthusiasts and casual players. The company’s focus on providing an enjoyable and interactive experience sets it apart from traditional golf courses and has contributed to its success.

Driving Revenue Growth

Topgolf’s business model has been instrumental in driving revenue growth for the company. By offering a wide range of services and experiences beyond golf, Topgolf has diversified its revenue streams. In addition to golfing, customers can enjoy food, drinks, and entertainment, creating multiple sources of income. The company’s ability to attract a diverse customer base, including families, young adults, and corporate clients, has further contributed to its revenue growth. With over 68 locations across the globe as of 2021, Topgolf’s rapid expansion and evolving business model have enabled it to tap into new markets and capitalize on the growing demand for unique sports entertainment experiences.

Topgolf’s business model has proven to be a game-changer in the sports entertainment industry. By attracting a wide range of customers, enhancing the golfing experience through technology, and driving revenue growth, Topgolf has established itself as a leader in the industry. As the company continues to expand and innovate, it is poised to shape the future of golf and make the sport more inclusive and accessible to a broader audience.

Topgolf’s Future Outlook

As Topgolf continues to solidify its position as a leader in the sports entertainment industry, its future outlook is characterized by various strategic initiatives aimed at growth, innovation, and inclusivity. Here are three key aspects that contribute to Topgolf’s future outlook:

Green Grass Opportunities

To further revolutionize the golf industry and expand its offerings, Topgolf has introduced the “Topgolf Green Grass” initiative. This initiative aims to create a seamless pathway for golfers to progress from hitting balls at recreational venues to competing in tournaments, such as those on the PGA TOUR ( Forbes ). By integrating traditional golf into its offerings, Topgolf is diversifying its revenue streams and attracting a wider demographic of golf enthusiasts, including those who may not have considered traditional golf before.

The “Topgolf Green Grass” initiative aligns with Topgolf’s vision of making the game of golf more inclusive and accessible to individuals of all ages and skill levels. This strategic move not only enhances the overall golfing experience for Topgolf patrons but also opens up new opportunities to connect with customers beyond the physical venues. By providing a seamless transition from recreational golfing to competitive play, Topgolf aims to solidify its position as a comprehensive golf entertainment destination.

Continued Expansion and Innovation

Topgolf’s future outlook also involves continued expansion and innovation. The company’s ambition is to connect with customers beyond the physical venues and create a seamless digital experience. Leveraging data analytics and digital engagement, Topgolf aims to personalize offerings and cater to the evolving preferences of its diverse customer base ( CIO ). By embracing technology and leveraging customer insights, Topgolf can enhance its value proposition and maintain a competitive edge in the industry.

Furthermore, Topgolf’s commitment to innovation extends to tracking technologies and other advancements that enhance the overall customer experience. By incorporating technology and tracking innovations, Topgolf can provide real-time feedback and analysis to players, enabling them to track their performance and improve their game. These innovations not only add value to the customer experience but also contribute to the overall success of Topgolf’s business strategy.

Making Golf More Inclusive and Accessible

A significant aspect of Topgolf’s future outlook is its dedication to making golf more inclusive and accessible. By breaking down barriers and creating a welcoming environment, Topgolf attracts a wide range of customers, including those who may have felt excluded from traditional golf settings. Through its unique blend of entertainment and technology, Topgolf has successfully created a social experience that appeals to individuals of all ages and skill levels. This inclusivity has contributed to the company’s remarkable growth and customer satisfaction.

By continuing to prioritize inclusivity, Topgolf aims to make golf accessible to individuals who may not have previously considered the sport. This commitment aligns with the company’s long-term vision of growing the game of golf and fostering a sense of community and connection among its diverse customer base. By making golf more inclusive and accessible, Topgolf secures its position as a key player in the sports entertainment industry and ensures a bright future for the company.

As Topgolf expands its reach, integrates traditional golf into its offerings, embraces technology and innovation, and prioritizes inclusivity, its future outlook remains promising. By capitalizing on “Green Grass Opportunities,” continuing to expand and innovate, and making golf more accessible to a wide range of individuals, Topgolf solidifies its position as a trailblazer in the sports entertainment industry.

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Topgolf seeks to grow business with 'fun and accessible' campaign

Topgolf Callaway Brands has been “ahead of the curve in merging sport and entertainment into one experience,” becoming a “benchmark as other companies have begun trying to adapt it to other sports,” according to Jeff Beer of FAST COMPANY. In 2022, Topgolf had “more than 31 million players across its more than 95 venues, online games, and third party driving ranges using its Toptracer technology.” The Topgolf side of the business “makes up about 40%" of the company’s overall revenue and is the “growth engine.” For the first half of 2023, Topgolf “grew 20.5% over the year earlier period,” to $874.3M. Over the next five years, Topgolf expects to “expand from its current 95 global locations to more than 150 and 70 million visits.” To help in that aim, Topgolf this week is launching a new brand campaign, an “extension of its previous work launched late last year, but doubling down on its ambition to seamlessly blend golf with ... not golf.” The goal is to “illustrate just how serious the brand is about making golf more fun and accessible.” The company will be “selling its own line of golf gloves featuring wild and stylish designs” to “put that Hand Head mentality on your actual hands.” It is also why Topgolf is a “featured level in the video game PGA Tour 2K.” Beer noted more than half of Topgolf’s customers are "millennials and Gen Z," which "makes it an attractive collaboration partner for other brands” ( FAST COMPANY, 8/12 ).

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Perfect Putt

Topgolf is the Greatest Golf Business

Topgolf is just scratching the surface..

Every Monday, I write a newsletter breaking down the business in golf. Welcome to the 210 new Perfect Putt members who have joined us since last Monday. Join 2,718 intelligent and curious golfers by subscribing below.

Hey Golfers —

Callaway recently held its 2022 Investor Day. I reviewed the 150-page document over the weekend. Topgolf is a wildly fascinating business; in my opinion, it is the greatest golf business ever.

Before we get into why — here’s the backstory on Topgolf . 

Topgolf was initially founded under the name of ‘Target Oriented Practice Golf’ by twins Steve and Dave Jolliffe. The entrepreneurial brothers sold their business in 1997 and were looking for a new business venture.

The duo concluded that driving ranges were dull and uninspiring — why not disrupt the space? So, in 2000 they opened their first location in Watford, United Kingdom, about 20 miles northeast of London.

Their secret sauce? Implanting an RFID chip in each golf ball to provide exact distance and location — a proprietary technology to Topgolf. This allowed Topgolf to gamify the driving range experience.

Initially, the brothers struggled to get adoption. Golfers and equipment companies weren’t necessarily enthusiastic about the business. It was challenging to find investors — they received countless rejections.

In the early 2000s, a handful of partners licensed the technology and founded ‘Topgolf International’. Subsequently, they opened three locations in the United States. Alexandria was the first location that opened in 2005.

Alexandria, Virginia

Chicago, Illinois

Dallas, Texas

In 2006, Callaway made its first investment in Topgolf, and in 2009 Topgolf International acquired Topgolf UK.

Topgolf’s growth started to boom — in 2014, sales exceeded $160 million. Topgolf-owned and operated venues continued to explode. In 2017, Topgolf had 40 venues — at the end of 2021, Topgolf had 70 venues and did $1.2 billion in revenue.

Callaway closed on the acquisition of the remaining 86% of Topgolf (Callaway had already owned 14%) in March of 2021. The deal was valued at $2.6 billion .

I think Topgolf is the greatest golf business ever for these two primary reasons.

Market penetration opportunity

Introduction of golf to new players

It is estimated that Topgolf makes up 85% of the off-course play , an enormous number in the high-growth golf-entertainment space. Yet, Topgolf only touches 20% of the United States population within a 25-minute drive of a Topgolf venue.

By the end of 2023, Topgolf estimates that it will have a venue within a 25-minute drive of 26% of the United States population, leaving a staggering 74% of the United States population for future growth .

But it doesn’t stop there.

Topgolf has four international franchised venues and will ramp to at least 22 venues by 2025 .

Topgolf has identified around 450 venue opportunities globally. Using the 2021 venue number of 70 — Topgolf is only 15% of where they think they can be venue-wise; that is incredible.

Golf has been booming the last two years, in large part due to the pandemic. According to the National Golf Foundation , a record 3.2 million Americans played the game on a golf course for the first time in 2021 . The 2021 growth was on the heels of 3 million Americans playing golf for the first time in 2020.

But Topgolf might have something to do with that number.

Topgolf utilized the National Golf Foundation to conduct a survey. Topgolf learned that they introduced golf to millions of new players. In fact, 75% of non-golfers who engage with Topgolf are now interested in playing on a course .

Of the 30 million guests that visited Topgolf in 2021, 50% identified as non-golfers . Meaning Topgolf likely introduced the game to 15 million people last year. And of those 15 million people, 75%, or 11.25 million people, are interested in playing on a course .

This is what growing the game of golf looks like.

Let’s take it a step further.

Topgolf breaks its business into three units.

Topgolf Media

Toptracer is incredibly interesting. Topgolf acquired Protracer in 2016 and re-branded it to Toptracer. Toptracer provides us with the technology to trace the golf ball on TV while watching professional golf.

Toptracer is the technology in Topgolf venues and many other driving range venues.

Here is Toptracer’s crazy stat. They have a dominant market share with 15,000 bays but only meet 3% of the total addressable market .

Toptracer’s CAGR for bay installs from 2019- to 2021 is greater than 60%.

The best thing about Toptracer? Topgolf competitors are utilizing the technology in their venues. A quick example, Suite Shots is opening a location in West Des Moines, Iowa, and will be installing Toptracer in its 60 bays . Absolutely fascinating.

Let’s wrap it up with some quick numbers.

Depending on Topgolf’s venue size, development costs range from $15 million to $60 million per build — with the average venue development cost coming in at $30 million.

Average Topgolf venue revenue — $17.5 million

Adjusted EBITDAR — $5.6 million

Adjusted EBITDAR Margin — 32%

Cash Flow — $3.7 million

Cash on Cash Returns — 45 - 50%

Topgolf is a winning business and is an incredibly impressive golf business.

Providing some context of Topgolf’s $1.2 billion in revenue.

Callaway’s revenue, less Topgolf in 2021, was $2.045 billion.

Acushnet’s revenue in 2021 was $2.147 billion.

Seeing golf-related businesses succeed is a win for the industry. But witnessing a golf-related business that is succeeding and introducing the game to millions of golfers excites me the most.

Have yourself a great Monday. Talk to you next week!

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Topgolf Fore the Win

Topgolf circumvents the declining trend of the golf industry by effectively aligning its business and operating models.

While the golf industry in the United States enjoyed tremendous growth in the 1990s and early 2000s as it rode the success of superstar Tiger Woods, participation in the sport has declined in recent years. According to a study by the National Golf Foundation, the number of golfers has dropped from 30 million in 2005 to 24.7 million in 2014 (1). While the economic recession certainly played a role in this decline, a shift in consumer behavior is also responsible as today’s consumers demand more value out of their golfing experience than offered by the traditional golf infrastructure.

Business Model

A Topgolf driving range leverages technology to create a game out of the experience. Its golf balls contain microchips that can track the precise outcome of a player’s shot, allowing golfers to keep score and compete against one another as they aim for targets much like a game of darts. While the driving range is a key piece of Topgolf’s business model, the company differentiates itself from the incumbent driving ranges and golf courses by positioning itself as “a global sports entertainment community creating the best times of your life” (company website). Topgolf has been able to fight the overall downward trend of the golf industry by effectively aligning its operating model with its business model.

Operating Model

Facility Design 

Pathways to Just Digital Future

While the size and specs of Topgolf facilities vary slightly by location, a facility will typically include pool tables, shuffleboard, flat screen TVs, bar tables, couches, fireplaces, private event rooms, a rooftop terrace bar, and of course a 3-story driving range (5). While wait time for driving range bays can sometimes be as long as 3-4 hours, Topgolf is able to create and abstract value from customers who are waiting in line (much like Benihana’s) through these various other entertainment outlets. This strategy seems to be paying off as over 60% of its customers are not prior golfers (4).

Hiring Process

In order to deliver on its claim to offer its customers an end-to-end experience as opposed to merely a place to hit golf balls, Topgolf must ensure it is hiring the right people. In order to accomplish this goal, Topgolf utilizes a unique hiring process that encourages candidates to show their creativity, passion, and ability to entertain. Applicants are asked to brainstorm ideas for events, come up with unique business plans, or even sing and dance on the spot (4). Employees at a Topgolf facility are constantly interacting with customers in order to create an entertainment community, making its people a key ingredient in the business model.   

Food & Drink

95% of all food at a Topgolf is made in-house from scratch. Each kitchen is led by an experienced executive chef who coordinates with corporate to determine a menu. Even the hiring process for the executive chefs aligns with the business model, as Topgolf hosts a Chopped- style competition in order to screen candidates (2). As a result of a focused effort on its operating processes within the kitchen, 60% of Topgolf’s revenue now comes from food and beverages (4).

Growth Strategy

Topgolf’s decision to engage in strategic partnerships to fuel growth has allowed the company to benefit from economies of scale. For example, Topgolf commonly works with the same 3 companies when opening a new location:

• real estate investment trust EPR to secure financing for new properties (3)
• Aria Group Architects as architect with specialties in entertainment, restaurant, and hospitality (3)
• ARCO/Murray National Construction Co. as general contractor (3)

While the high fixed costs associated with this business already serve as a barrier to entry, these strategic partnerships give Topgolf an even greater advantage over potential new-comers to the market. Through these partnerships Topgolf has been able to create a streamlined design template that can be used for its new openings. However, in order to continue to align on its promise to deliver the best experience to the customer, Topgolf also engages with local partners to customize the look and feel of each location to match the culture of the local market (3).

https://www.youtube.com/watch?v=90TP1btBAbc

(1) http://www.golfdigest.com/story/number-of-golfers-steady-more

(2) http://www.atlantamagazine.com/dining-news/alpharettas-newest-entertainment-complex-topgolf-revs-up-its-menu/

(3) http://urbanland.uli.org/development-business/traditional-golf-fades-hybrid-sports-life-topgolf-tee/

(4) http://www.golfdigest.com/story/topgolf-luke-kerr-dineen

(5) http://klnbretail.com/topgolf-ashburn-opening-tomorrow/

Student comments on Topgolf Fore the Win

Great post David. I had my first Top Golf experience over the summer at home in Florida as they recently opened one in Tampa. It was a fantastic experience and I would definitely go back again. It was interesting learning about their operations. I had no idea most of their food was made from scratch! Or that they took hiring so seriously. I think it definitely shows, as I was impressed with how great the service was despite the crazy amounts of people there. I couldn’t tell if Top Golf was just a new fad or if this place was actually going to maintain this level of business. It was all the buzz when I was at home so I had to check it out. I think they definitely do a great job of getting people in and providing them other avenues of entertainment as they wait to golf (which can be long, as you mentioned). However, the wait is still fun and I didn’t mind it. And even while you golf I thought it was great that we got to eat and drink by our bay. The whole experience reminded me of those eat, drink and bowl type of places – except for golf. They translated that concept well. The only thing that concerns me is that the investment required to build a Top Golf is clearly high. Do you think they will have the strong consistent user base required to get returns on this investment? Or is this just a fad?

I love this idea! I want to visit one! As you mention, they are positioned as an entertainment alternative rather than a practice alternative. This struggles me, because (I think) it does not align to the causes of the downward trend on the number of golfers. Practicing golf is expensive and time consuming, so I would imagine Topgolf as a great alternative for amateur golfers. I can imagine executives practicing after their long workday or during lunch hours… That would lead to more loyal customers while not forgetting the customer base that they are currently serving. While doing so, I think that some changes of their operating model might be necessary, such as confirmed reservation and personalized service.

Hey Arturo – thanks for the feedback! I completely agree that Topgolf needs to strike a balance between attracting new customers (non-golfers) to the game without simultaneously neglecting its customer base comprised of true golf aficionados (myself included). They do currently offer membership options with varying benefits, most notably of which is the ability for cardholders to skip the line upon arrival. While these membership options have sufficed to date, it will be interesting to see if Topgolf finds a need to further differentiate its operating model in order to cater towards its different customer segments as the user base continues to expand.

Great post, David. Topgolf is a such a fantastic idea, and it’s amazing how quickly it has grown and been successful in each new market. However, I am curious as to it’s ability to maintain it’s current growth trajectory and how rapidly it will try to expand given the large amount of remaining market white space (it’d be great if they put one in Boston already…). Likewise, it’s brand name and some of the key aspects of it business model you highlighted such as the strategic partnerships give it a great head start, but I wonder how long the model can remain unique and if a well capitalized and aggressive competitor could quickly start challenging.

Hi David, enjoyed reading this and am certainly keen to try one of these if they ever set one up in Boston! I usually end up playing competitive mini-games when I’m on a driving range, but the lack of microchip-enabled balls means there’s invariably a lot of arguing about who actually got closer to the pin…

I like how they’ve designed the facilities so as to encourage new golfers but I do wonder whether the business will stand the test of time. People have combined casual sports entertainment with good food and cold beer on tap for years (bowling alleys, pool or ping-pong bars etc.) but I can’t think of many off the top of my head that have managed to be consistently successful over the long haul. Perhaps there is a risk that more casual golfers flock to Topgolf as a fad of current times before moving on to something else? Topgolf might need to keep innovating its offering to keep them coming back, but like Arturo above, I do wonder whether the business is doing enough to retain serious golfers. While it can try to balance its offering somewhat, at the end of the day it might need to make call on whether its core target market is serious golfers looking to hone the specifics of their swing or groups of amateur golfers looking for something other than just going to their local bar.

David – very interesting post. While I’ve never been, it sounds like something I’d love to do.

My only concern is the major capital investment needed and whether they need a big box location to delivery a cool/new golf experience, especially in the broader context of other cheap/accessible golf experiences coming to market. Golf simulators that allow you to play famous courses have plummeted in price and space requirement Lately. You have apartment buildings and offices installing them in 100-200 square foot locations and give the virtual experience of playing the premier golf courses in the world. Is this a threat? Or can they find a way to leverage this as add an additional product to their portfolio without cannibalizing the core. Maybe they offer the “lite” experience in airports, office buildings and other short-attention span locations and use them as a hook to draw additional traffic to their bigbox locations.

David, I’ve never heard of Topgolf but it sounds awesome! It’s fascinating that 60% of its customers are not prior golfers – that has to be in stark contrast to other driving ranges and golf courses. It leads me to wonder, is Topgolf’s target consumer someone that has never played golf but always wanted to try? Or is it someone looking for a fun, activity-based experience like a bowling alley, etc, and Topgolf fits into that entertainment category? If it really is the former, then perhaps Topgolf should consider partnering with nearby courses and golf professionals. By making the introductory experience more comfortable to new players, it would definitely be a valuable service for the sport!

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Topgolf callaway brands positioned to thrive as golf industry evolves.

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Topgolf made up 39% ($1.5 billion) of Topgolf Callaway Brand’s total revenue ($3.995 billion) in ... [+] 2022. Jason Armond / Los Angeles Times via Getty Images)

More than 41 million Americans age 6+ played golf in 2022. Of that, 15.5 million (38%) participated exclusively via off-course activities like driving ranges, indoor simulators or golf-entertainment venues like Topgolf, according to the National Golf Foundation.

Within the sport’s biggest customer age segment (ages 18-34), 6.2 million played on-course golf, while another 5.8 million were off-course participants only.

“The golf ecosystem is unique and defining, and changes everything,” Topgolf Callaway Brands president and CEO Chip Brewer said. “This growth and evolution is making golf more accessible and creating structural growth around this game we all love. … Think about how things like Topgolf or Five Iron can keep golf a bigger part of your life. It’s so significantly different and it’s coming on like a freight train. Obviously Covid’s been very good for golf too.

“Five years ago, these off-course golf concepts weren’t scaled enough to really reach you. There will be more people visiting a Topgolf this next year than will be playing traditional golf.”

Seeing this rising trend, Callaway acquired Topgolf , which was founded in the United Kingdom in 2000, for $2.6 billion in a deal that closed in March 2021. In August of the following year, it announced the new corporate name Topgolf Callaway Brands Corp. would go into effect beginning September 2022.

Today, Topgolf makes up 39% ($1.5 billion) of Topgolf Callaway Brand’s total revenue ($3.995 billion) in 2022, according to the company’s full-year earnings report. Segment revenue for Topgolf last year increased $461.4 million (42.4%) compared to 2021.

Topgolf Callaway Brands CEO Chip Brewer with NBA star Steph Curry. Callaway and Curry first began ... [+] working together in 2019. (AP Photo/Andrew Harnik)

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Topgolf Callaway Brands estimates Topgolf is expected to generate approximately 50% of the company’s total adjusted EBITDA in 2023.

With 11 venues expected to open in 2023—including its first in mainland China—Topgolf’s influence on the evolving game of golf won’t just benefit Topgolf Callaway Brands, but the sport overall.

Interest in playing among non-golfing young adults (18-34) is high, according to the NGF, with more than 6 million saying they are “very interested” in taking up the game while a record 3.3 million people played on a golf course for the first time in 2022, according to the NGF.

Newcomers continue to be more diverse than the sport’s overall participation base with beginners 45% more likely to be non-white and 35% more likely to be female.

“I’m excited about the business prospects associated with Topgolf that creates this unique, new enterprise, but I’m also excited about how it’s positively impacting the game of golf,” Brewer said. “We’ve talked forever about growing the game. We’ve talked forever about making it more diverse. You know what does that better than anything I’ve ever seen? Topgolf.”

While Topgolf serves as a popular introduction to golf for millions, once they’re hooked, Topgolf Callaway Brands’ ecosystem of equipment, apparel and technology hopes to keep consumers in and around the game even longer. That’s why it’s no surprise to see Callaway and Odyssey clubs and TravisMathew and Ogio apparel and products at Topgolf facilities.

To engage with golf’s diversifying customer, fan and participant base, Callaway leverages social content from creators including Roger Steele and Good Good Golf as well as by supporting Steph Curry’s Underrated Golf Tour. Callaway and Curry recently agreed to a multi-year extension of their partnership on philanthropic and game-expanding endeavors which first began in 2019.

Some of the world’s top golfers on both the PGA Tour and LPGA are sponsored by Callaway including Jon Rahm, Xander Schauffele, Sam Burns, Rose Zhang, Atthaya Thitkul and Yuka Saso. The brand’s new Paradym driver has seven wins on the PGA Tour, five on the DP World Tour and two on the Champions Tour so far in 2023, while being the No. 1 driver model on the LPGA tour.

Currently the No. 3 golfer in the world, Jon Rahm has three wins on the PGA Tour this season. (AP ... [+] Photo/Charlie Neibergall)

Callaway’s golf equipment segment revenue increased $177.4 million (14.4%) in 2022 compared to the prior year, while its active lifestyle segment revenue increased $223.5 million (27.4%).

Callaway acquired Ogio and TravisMathew in 2017 for $75.5 million and $125.5 million, respectively. It added Jack Wolfskin the following year for $476 million.

While Brewer said the company isn’t “going to bite at everything that comes by,” Topgolf Callaway Brands could potentially add more brands under its umbrella, but is more than pleased to “run the playbook that we have” with its current modern golf ecosystem, which also includes Toptracer, Odyssey and World Golf Tour as well as a minority investment in indoor golf and entertainment company Five Iron Golf.

“The fundamental transformation that is occurring around golf now and our position in it gives us organic growth from the addition of venues, which creates more modern golfers, which creates more traditional golfers,” said Brewer, who has been with the company since March 2012. “You have almost this flywheel effect of growth that gives us a competitive advantage in both scale and reach to all these different golfers. It’s benefitting the consumer and it’s benefitting the golf ecosystem.

“It’s significantly different and we really couldn’t have foreseen something like this 10 years ago. It wasn’t clear to anybody how significant off-course golf would be for golf in general but it’s starting to become very obvious that off-course golf is going to be the funnel to get into golf and is going to expand the universe of golfers very, very significantly.”

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• Topgolf Entertainment Group

Press Releases

We are a global sports, technology and entertainment community connecting fans in meaningful ways through the experiences we create, the innovation we champion and the good that we do.

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Callaway and Topgolf to Combine, Creating a Global Golf and Entertainment Leader

CARLSBAD, CA and DALLAS, TX — October 27, 2020 — Callaway (NYSE:ELY) and Topgolf Entertainment Group (“Topgolf”) today announced that the companies have entered into a definitive merger agreement. Under the terms of the agreement, Callaway and Topgolf will combine in an all-stock transaction creating a global golf and entertainment leader. The number of shares to be issued is based upon an implied equity value of Topgolf of approximately $2 billion, including the 14% already owned by Callaway.

Topgolf is the leading tech-enabled golf entertainment business, with an innovative platform that comprises its groundbreaking open-air venues, revolutionary Toptracer technology and innovative media platform with a differentiated position in eSports. Topgolf generated approximately $1.1 billion in revenue in 2019 and has grown at a 30% compound annual rate since 2017. Callaway is a leader in the global golf equipment market with a scale position in active-lifestyle soft goods and a proven ability to deliver strong returns, including company growth that has exceeded golf market growth for seven consecutive years.

The companies together will be able to accelerate growth, including through:

• Fully Funded High Growth Opportunities : Topgolf is a high-growth platform with attractive unit economics across its businesses that will benefit from Callaway’s strong financial position that can fully fund Topgolf’s growth plans at an attractive cost of capital.
• A Highly Complementary Fit : The two companies share a focus on golf and active-lifestyle consumers. With Topgolf’s 90 million consumer touch points a year, the combined company will benefit from a compelling family of brands with reach across multiple channels including retail, venues, e-commerce and digital communities. Topgolf is introducing new players to the game of golf, a powerful trend that benefits Callaway’s golf equipment and soft goods businesses.
• Enhanced Resources to Accelerate Growth : The combined company’s industry-leading sales, marketing and partnership infrastructure will drive traffic, increase same venue sales and accelerate conversion of new business opportunities. Together, Callaway and Topgolf’s significantly expanded consumer reach will drive increased promotion, exposure and sales of equipment and apparel to golfers and non-golfers alike.
• Innovation to Drive Long-term Potential : A shared innovative culture creates exciting long-term opportunities including the potential to distribute content across connected screens for instruction, fitness and lifestyle.

“Together, Callaway and Topgolf create an unrivaled golf and entertainment business,” said Chip Brewer, President and Chief Executive Officer of Callaway. “This combination unites proven leaders with a shared passion for delivering exceptional golf experiences for all – from elite touring professionals to new and aspiring entrants to the game. We’ve long seen the value in Topgolf and we are confident that together, we can create a larger, higher growth, technology-enabled global golf and entertainment leader. Callaway’s strong financial profile will enable the combined company to accelerate innovation, develop exciting new products and experiences, and create compelling value for shareholders, while providing the dedicated teams of both companies more opportunities to showcase their talents and complementary capabilities.”

“We are excited to join the Callaway family and strengthen the experiences we create at the intersection of sports and tech-driven entertainment,” said Dolf Berle, Chief Executive Officer of Topgolf. “Fueled by a tremendous team of associates and a diverse offering across our venues, Toptracer, and media platform, Topgolf is truly changing the landscape of the industry by making golf more inclusive and accessible to people of all ages, demographics and skill levels. As part of Callaway, we plan to grow our leadership position by leveraging Callaway’s brand reputation, industry relationships and financial strength to connect more communities around the world to the Topgolf experience.”

Callaway first invested in Topgolf in 2006, and the companies have maintained a strong partnership since, including an exclusive golf partnership agreement at all Topgolf venues. Topgolf has achieved rapid growth and strong customer engagement since its founding in 2000, driven by several platforms, including:

• Venues – The company’s signature platform defined by its immersive gameplay, proprietary technology and local, high-quality food and beverage offers a unique social destination for all. With its open-air, climate-controlled bays, Topgolf venues are structurally advantaged to benefit from consumer preferences for outdoor activities. Topgolf has 63 locations around the globe – including a robust pipeline of new openings – serving more than 23 million guests in 2019 with more than 50% of consumers identifying as non-golfers.    
• Toptracer – A leading ball-tracing technology best known for transforming televised golf is now being brought directly to everyday golf. By bringing professional tracing technology to mobile devices and driving ranges, Topgolf is enhancing the golf experience. The technology has been deployed to more than 7,500 range bays in three years (representing approximately one percent penetration of the total addressable market). This business unit has achieved revenue growth of 233% in the past three years.  
• Media – With World Golf Tour, a leading mobile golf game with 28 million members as of 2019, Topgolf has built a strong digital presence in the game of golf. The company’s proprietary, in-house gaming capabilities also create innovative sponsorship and consumer engagement opportunities throughout Topgolf’s community of players competing across the company’s interconnected digital and in-person platforms.

“Since its inception, Topgolf has created an innovative, tech-inspired twist on the golf driving range experience, turning it into a global entertainment and sports movement. Our track record of creativity and diversity of offerings will only grow stronger as part of Callaway, a global leader in the industry,” said Erik Anderson, executive chairman of Topgolf. “All of us are looking forward to building new experiences, reaching new audiences and solidifying our digital infrastructure as we connect communities around the globe.”

In addition to Callaway, the current Topgolf ownership includes Providence Equity Partners, WestRiver Group and Dundon Capital Partners, which added: “This is a natural combination that brings together two complementary businesses at the center of one of the most dynamic sports and entertainment experiences available today. We are excited to support their continued growth as a united company.” 

Financial Benefits and Transaction Structure

Callaway and Topgolf both delivered strong financial results immediately before the COVID pandemic and have since recovered ahead of expectations. Both companies are well positioned to take advantage of both short- and long-term changes in consumer behavior as a result of the pandemic. This includes favorable trends in rounds played and growth in beginning and returning golfers as well as broader consumer preferences for outdoor activities. 2,3  The combined company will have a highly diversified revenue mix, including Golf Equipment, 30%; Topgolf, 46%; and Softgoods, 24% 4 .

The combined company will also benefit from a strong financial profile, including:

• Pro forma revenue of approximately $2.8 billion based on fiscal year 2019 results that is expected to grow to approximately $3.2 billion by 2022 and at approximately 10% per year in the years following
• Pro forma adjusted EBITDAS of $270 million based on fiscal year 2019 results that is expected to grow to approximately $360 million by 2022 and at mid-to-high teens per year in the years following
• Funded leverage 5  of approximately 3.6x in 2022, with opportunities to de-lever from there

Topgolf is in the early stages of its growth with more than ten years of planned unit growth opportunity in its U.S. venues business and just 2% addressable market penetration in international venues and 1% in the Toptracer Range business. The company has a proven ability to innovate to expand its addressable market and capture the potential of games and content on its interconnected platform.

Callaway’s continued strong cash generation and ample liquidity, including more than $630 million of cash and available credit facilities as of Q3 2020, position the company to fund Topgolf’s continued growth with significant ability to pay down debt at the same time.

Under the terms of the merger agreement, Callaway will issue approximately 90 million shares of its common stock to the shareholders of Topgolf, excluding Callaway, which currently holds approximately 14% of Topgolf’s outstanding shares. Upon completion of the merger, Callaway shareholders will own approximately 51.5% and Topgolf shareholders (excluding Callaway) will own approximately 48.5% of the combined company on a fully diluted basis.

The number of shares issued is based upon an implied equity value of Topgolf of $1.986 billion 6  (including Callaway’s ownership position). The number of shares issued is also based upon a fixed price of Callaway common stock of $19.40 per share. Callaway will assume Topgolf’s net debt, which is estimated to be $555 million at closing 7 , resulting in an estimated enterprise value for Topgolf of approximately $2.5 billion.

Governance and Leadership

Upon closing, the combined company’s Board of Directors will consist of 13 directors, including three directors appointed by Topgolf shareholders. Chip Brewer will continue to lead the combined company as President and Chief Executive Officer. Dolf Berle will continue to lead the Topgolf business through a transition period following the close of the transaction, at which time he intends to step down to pursue other leadership opportunities. John Lundgren will continue as Chairman of the Board of the combined company, while Erik Anderson will serve as Vice Chairman.

Topgolf will continue to operate from its headquarters in Dallas, Texas.

Timing and Approvals

The transaction is subject to the approval of the shareholders of both Callaway and Topgolf, as well as other customary closing conditions, including required regulatory approval. The parties expect to complete the transaction in early 2021, subject to satisfaction of these conditions.

Callaway Preliminary Q3 Results and Business Update

Chip Brewer added: “The world is rediscovering golf in a way that has led to a record quarter for our company. Both our golf equipment and soft goods businesses are recovering more quickly than we expected, and our third quarter projections reflect this momentum. Our recent investments into our e-commerce capabilities have proven particularly valuable, showing strong growth across all of our business segments this year including 108% growth in e-commerce for our soft goods segment in Q3.”

Based on currently available information, the Company estimates the following results for the quarter ended September 30, 2020:

* Earnings before Interest, Taxes, Depreciation and Amortization Expense, and Stock Compensation Expense

Goldman Sachs & Co. LLC served as the financial advisor to Callaway and Latham & Watkins LLP served as legal counsel. Morgan Stanley & Co. LLC and J.P. Morgan served as financial advisors and Weil, Gotshal & Manges LLP served as legal counsel to Topgolf.

Conference Call Details

Callaway will host a conference call today, October 27 th , at 5:30 p.m. Eastern time to discuss this transaction. If you would like to participate in the call, please dial 1-877-879-1183 or 1-412-902-6703, if calling internationally, approximately 15 minutes prior to the start of the call (access code: 5543896).

A live webcast of the conference call and downloadable slides will be available online at: https://ir.callawaygolf.com . A replay will be made available online approximately three hours following the live call and will remain available through October 27, 2021. The replay may be accessed through the Internet at this link .

Preliminary Financial Estimates

The preliminary estimates presented above are the responsibility of management and have been prepared in good faith on a consistent basis with prior periods. However, the Company has not completed its financial closing procedures for the three months ended September 30, 2020, and its actual results could vary materially from these preliminary estimates. In addition, the Company's independent registered public accounting firm has not audited this information or completed its quarterly review procedures for the quarter ended September 30, 2020 and does not express an opinion or any other form of assurance with respect to these preliminary estimates or their achievability. During the course of the preparation of the Company's consolidated financial statements and related notes as of and for the three months ended September 30, 2020, the Company and its auditors may identify items that would require the Company to make material adjustments to the preliminary estimates presented above. As a result, investors should exercise caution in relying on this information and should not draw any inferences from this information regarding financial or operating data not provided. These preliminary estimates should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. In addition, these preliminary estimates are not necessarily indicative of the results to be achieved in any future period. Investors are cautioned not to place undue reliance on such preliminary estimates.

Non-GAAP Information

The GAAP results contained in this press release have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). To supplement the GAAP results, the Company has provided certain non-GAAP financial information as follows:

EBITDAS.  The Company provides information about its results excluding interest, taxes, depreciation and amortization expense, and non-cash stock compensation expense. Additionally, EBITDAS excludes these same line items from forecasted net income.  A long-term forecast of each of these line items is not available without unreasonable efforts due to the variability of these items and the inability to predict them with certainty.  Accordingly, we have not provided a further reconciliation of EBITDAS to GAAP net income.

In addition, the Company has included in the schedules to this release a reconciliation of non-GAAP information to the most directly comparable GAAP information. The non-GAAP information presented in this release and related schedules should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP. The non-GAAP information may also be inconsistent with the manner in which similar measures are derived or used by other companies. Management uses such non-GAAP information for financial and operational decision-making purposes and as a means to evaluate period-over-period comparisons and in forecasting the Company's business going forward. Management believes that the presentation of such non-GAAP information, when considered in conjunction with the most directly comparable GAAP information, provides additional useful comparative information for investors in their assessment of the underlying performance of the Company's business with regard to these items. The Company has provided reconciling information in the attached schedules.

About Callaway Golf Company

Callaway Golf Company (NYSE: ELY) is a premium golf equipment and active lifestyle company with a portfolio of global brands, including Callaway Golf, Odyssey, OGIO, TravisMathew and Jack Wolfskin. Through an unwavering commitment to innovation, Callaway manufactures and sells premium golf clubs, golf balls, golf and lifestyle bags, golf and lifestyle apparel and other accessories. For more information please visit www.callawaygolf.com, www.odysseygolf.com, www.OGIO.com, www.travismathew.com, and www.jack-wolfskin.com .

About Topgolf Entertainment Group

Topgolf Entertainment Group is a technology-enabled global sports and entertainment community that connects people in meaningful ways through the experiences we create, the innovation we champion and the good we do. What started as a simple idea to enhance the game of golf has grown into a movement where people from all walks of life connect at the intersection of technology and sports entertainment. Topgolf Entertainment Group's platforms include Topgolf venues, Topgolf International, Toptracer, Topgolf Media and Topgolf Swing Suite. Follow @topgolf on Instagram, Facebook, Twitter and LinkedIn, or visit the Topgolf Press page for the latest news.

For Callaway: Brian Lynch Patrick Burke (760) 931-1771 [email protected]

For Topgolf: Kara Barry [email protected]

Additional Information and Where You Can Find It

Callaway Golf Company will file with the SEC a registration statement on Form S-4, which will include the proxy statement of Callaway Golf Company that also constitutes a prospectus of Callaway Golf Company and a consent solicitation statement of Topgolf International, Inc.  (the “proxy statement/prospectus/consent solicitation”).  INVESTORS AND STOCKHOLDERS ARE URGED TO CAREFULLY READ THE PROXY STATEMENT/PROSPECTUS/ CONSENT SOLICITATION, AND OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC, IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT CALLAWAY GOLF COMPANY, TOPGOLF INTERNATIONAL, INC., THE PROPOSED TRANSACTION AND RELATED MATTERS .  Investors and stockholders will be able to obtain free copies of the proxy statement/prospectus/consent solicitation and other documents filed with the SEC by the parties through the website maintained by the SEC at www.sec.gov.  In addition, investors and stockholders will be able to obtain free copies of the proxy statement/prospectus/consent solicitation and other documents filed with the SEC on Callaway’s website at https://www.callawaygolf.com (for documents filed with the SEC by Callaway).

No Offer or Solicitation

This communication is for information purposes only and is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote in any jurisdiction pursuant to the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law.  No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. 

Participants in the Solicitation

Callaway, Topgolf, and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Callaway in connection with the proposed transaction.  Information regarding the persons who are, under the rules of the SEC, participants in the solicitation of the stockholders of Callaway and Topgolf, respectively, in connection with the proposed transaction, including a description of their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement/prospectus/consent solicitation when it is filed with the SEC.  Information regarding Callaway’s directors and executive officers is contained in Callaway’s Annual Report on Form 10-K for the year ended December 31, 2019 and its Revised Definitive Proxy Statement on Schedule 14A, dated March 27, 2020, which are filed with the SEC and can be obtained free of charge from the sources indicated above.

Forward-Looking Statements

This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  The words “may,” “should,” “will,” “could,” “would,” “anticipate,” “plan,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” and similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made and are not guarantees of future performance. Such forward-looking statements include, but are not limited to, statements about the benefits of the business combination transaction involving Callaway and Topgolf, including the anticipated operations, financial position, liquidity, performance, prospects or growth and scale opportunities of Callaway, Topgolf or the combined company, the strategies, prospects, plans, expectations or objectives of management of Callaway or Topgolf for future operations of the combined company, any statements regarding the approval and closing of the merger, including the need for stockholder approval and the satisfaction of closing conditions, and statements of belief and any statement of assumptions underlying any of the foregoing.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors relate to, among others: risks and uncertainties related to our pending merger with Topgolf, including the failure to obtain, or delays in obtaining, required regulatory approval, the risk that such approval may result in the imposition of conditions that could adversely affect Callaway or the expected benefits of the proposed transaction, any termination fee that may be payable by Callaway pursuant to the terms of the merger agreement, or the failure to satisfy any of the closing conditions to the proposed transaction on a timely basis or at all; costs, expenses or difficulties related to the merger with Topgolf, including the integration of the Topgolf business; failure to realize the expected benefits and synergies of the proposed transaction in the expected timeframes or at all; the potential impact of the announcement, pendency or consummation of the proposed transaction on relationships with Callaway’s and/or Topgolf’s employees, customers, suppliers and other business partners; the risk of litigation or regulatory actions to Callaway and/or Topgolf; inability to retain key personnel; changes in legislation or government regulations affecting Callaway and/or Topgolf; uncertainty of the duration, scope and impact of COVID-19; a further spread or worsening of COVID-19; any further regulatory actions taken in response to COVID-19, including the future shutdown of or restrictions on Callaway’s or Topgolf’s retail locations, venues, distribution centers, manufacturing plants or other facilities; the effectiveness of Callaway’s or Topgolf’s protective gear, social distancing guidelines, and other preventive or safety measures; disruptions to business operations of Callaway and Topgolf as a result of COVID-19, including disruptions to business operations from travel restrictions, government-mandated or voluntary shut-down orders or quarantines, or voluntary “social distancing” that affects employees, customers and suppliers; continued growth, momentum and opportunities in the golf industry; production delays, closures of manufacturing facilities, retail locations, warehouses and supply and distribution chains; staffing shortages as a result of remote working requirements or otherwise; uncertainty regarding global economic conditions, particularly the uncertainty related to the duration and impact of the COVID-19 pandemic, and related decreases in customer demand and spending; and economic, financial, social or political conditions that could adversely affect Callaway, Topgolf or the proposed transaction.

The foregoing list is not exhaustive. For additional information concerning these and other risks and uncertainties that could affect these statements, the golf industry, and Callaway’s business, see Callaway’s Annual Report on Form 10-K for the year ended December 31, 2019 as well as other risks and uncertainties detailed from time to time in Callaway’s reports on Forms 10-Q and 8-K subsequently filed with the SEC, including the proxy statement/prospectus/consent solicitation that will be included in the registration statement on Form S-4 that will be filed with the SEC in connection with the proposed transaction. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Callaway undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

CALLAWAY GOLF COMPANY

Supplemental Financial Information and Non-GAAP Reconciliation

(Unaudited)

(In millions)

Non-GAAP Reconciliation and Supplemental Financial Information

(1) In 2020, amounts represent certain non-recurring costs, including costs associated with the Company's transition to its new North America Distribution Center and the implementation of new IT systems for Jack Wolfskin, as well as $0.7 million of severance related to the Company's cost reduction initiatives. In 2019, amounts represent certain non-recurring transition costs associated with the acquisition of Jack Wolfskin, including consulting costs, audit fees and travel expenses, in addition to other non-recurring advisory fees.

1 Golf Datatech industry report published September 21, 2020 2 National Golf Foundation, August Rounds Play, Published September 2020 3 Morning Consult Polling, Published July 21, 2020 4  Based on 2022 projections 5 Excludes Deemed Landlord Financing 6 Implied equity value of $1.739 billion when accounting for the various preferential rights of Topgolf shareholders and excluding assumed stock options and Callaway’s ownership position 7 Topgolf Net Debt includes $152 million of Deemed Landlord Financing and $152 million of Cash

Topgolf Callaway is sized up by analysts after business separation announcement

hapabapa/iStock Editorial via Getty Images

Investors and analysts are reacting to the announced plan by Topgolf Callaway Brands Corp. ( NYSE: MODG ) to separate the legacy business and the Topgolf venue business. Under the plan, Callaway will trade as a golf equipment business with a highly complementary active lifestyle business, while Topgolf will trade as a high-growth, pure-play venue-based golf entertainment business. The company expects to spin off Topgolf, but will also explore other options.

Jefferies said the separation plan was not a surprise, and should be considered a positive step forward. However, analyst Randal Konik warned that the need for Callaway to retain all the debt diminishes the value of core Callaway. "Consequently, we don't anticipate significant movement in the stock," he noted. Jefferies continues to favor pure-play Acushnet Holdings ( GOLF ), which benefits from a simpler structure and strong management.

Morgan Stanley also took a cautious stance on the deal. Analyst Megan Alexander said it was encouraging to learn that Topgolf will moderate unit growth next year, will have no financial debt, and a $200M cash balance, but Topgolf was noted to still has ~$120 million of annual rent expense (vs. $307 million EBITDA) that grows 2% annually. "We believe maintenance capex is onerous and likely accelerates in the coming years given the rapid unit growth over the last several years," she warned.

Roth MKM believes the planned separation will help unlock value for holders of Topgolf Callaway ( MODG ). "Admittedly, the operating environment remains challenging, but the pro forma businesses are worth significantly more than MODG's current EV, in our opinion," noted analyst George Kelly. Roth MKM has a Buy rating and price target of $17 on MODG.

The last two ratings on Topgolf Callaway ( MODG ) from Seeking Alpha analysts were at Sell.

Shares of Topgolf Callaway ( MODG ) were up 5.67% in premarket trading on Thursday, after being up more than 11% in late trading on Wednesday. Short interest on MODG stands at 9.88% of the total float.

More on Topgolf Callaway Brands

• Topgolf Callaway Brands: Rating Downgrade On Poor SVS Performance
• Topgolf Callaway: Concerning Traffic Decline At Topgolf
• Topgolf Callaway Brands Corp (MODG) Q2 2024 Earnings Call Transcript
• Golf spinoff: Topgolf and Callaway to trade as separate businesses
• Topgolf Callaway Brands Non-GAAP EPS of $0.42 beats by $0.15, revenue of $1.16B misses by $30M

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Topgolf Callaway to separate in two companies, shares surge

In This Article:

Topgolf Callaway Brands Corp. announced its plan to split into two independent companies, separating its golf equipment and active lifestyle business from its venue-based golf entertainment business.

The company's shares surged 12.3% following the announcement of the intended separation into Callaway, with approximately $2.5 billion in revenue, and Topgolf, with approximately $1.8 billion in revenue, both through Q2 2024.

The proposed separation will be executed through a tax-free spin-off of the Topgolf business to shareholders. The company is considering the spin-off as the most likely option but will keep evaluating other potential methods to ensure maximum value for shareholders.

The decision to split follows a strategic review by the company's Board of Directors and management.

Chip Brewer, President and CEO of Topgolf Callaway Brands, highlighted the transformation of Callaway into a leading brand in golf equipment and the successful expansion of Topgolf, which has exceeded growth and free cash flow expectations. The separation aims to position both entities for success and enhance shareholder value by allowing Topgolf to focus on its high-growth entertainment business and Callaway on its core golf equipment and active lifestyle segments.

John Lundgren, Chairman of the Board of Directors, emphasized that the creation of two focused companies is designed to continue momentum and deliver shareholder value. The strategic rationale behind the separation includes enhanced focus, optimized capital allocation, simplified operations, and distinct investment theses for each business, which will allow investors to engage with each company based on its unique growth drivers and financial profiles.

Post-separation, Callaway will encompass the Golf Equipment, Toptracer, and Active Lifestyle businesses, aiming to generate significant free cash flow and return capital to shareholders.

Topgolf will focus on its entertainment venues, excluding Toptracer, working towards profitable sales growth and new venue development, while being well-capitalized with no financial debt to seize long-term growth opportunities.

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