When the late Ely Callaway started his namesake golf equipment company in the mid-1980s after successful entrepreneurial endeavors in the textile and wine industries, the Georgia native would go on to record another breakthrough business with his oversized Big Bertha drivers.
By the early ‘90s, after creating a successful line of Big Bertha irons, manufactured using an industry-first casting process, Callaway Golf became synonymous with golfers as it transformed the traditional club business. Nearly 40 years later, Callaway’s namesake company continues to be at the forefront of innovation when it comes to designing golf equipment.
But now, the Carlsbad, Calif.-based club manufacturer has even bigger aspirations for the golf industry. Callaway Golf Company not only wants to remain one of the leading equipment companies, but it’s also laid out an ambitious plan to transform the game itself and the way golf is being played globally.
As Callaway Golf Company President/CEO Chip Brewer describes it, he wants his publicly traded company (NYSE: ELY) to be the “leader in modern golf.” And this spring in the Southern California town of El Segundo, Callaway’s concept of “modern golf” will be on high-profile display once the company officially opens America’s first hybrid Topgolf/traditional course facility called Lakes at El Segundo.
The new publicly owned layout, which is just seven miles from SoFi Stadium in Los Angeles, formerly was a popular 9-hole executive course and two-story lighted driving range that also featured a pro shop, café and banquet facilities. Then the Topgolf phenomenon got the attention of city officials, and El Segundo approved a deal in 2019 to redevelop the property that could very well be the future of “modern golf.”
When construction at the new Lakes at El Segundo is scheduled to wrap up this May, the nine-hole course will be an expanded and lighted 10-hole loop adjacent to a state-of-the-art Topgolf facility featuring 102 hitting bays, nearly double the previous course’s capacity. Additionally, the facility will feature community event and meeting spaces and enough entertainment and flashy food and beverage to befit its Hollywood setting.
Once it opens, not only will it be the first facility of its kind in the country, but it represents Topgolf’s foray into the golf-strong Southern California market. Later this summer the company should also be up and running with its new 600,000-square-foot Topgolf facility in nearby San Bernardino County after signing a 20-year lease with the City of Ontario in 2019.
Brewer couldn’t be more excited about the company’s two new Southern California Topgolf facilities, after having opened a successful Topgolf Roseville location outside of Sacramento and another one last year in San Jose. And he’s more than bullish about Topgolf’s future, saying the company is positioned to add 10 new facilities per year in America and grow its U.S. Topgolf portfolio to more than 200 venues in the not-too-distant future.
That would more than triple the 70 Topgolf facilities currently owned and/or operated by Callaway Golf Company, which took control of Topgolf in March 2021 after a $2 billion merger deal gave Callaway sole ownership of the Dallas-based company. Prior to the merger, Callaway had an estimated 14 percent stake in the company – dating back to its initial investment in 2006.
The investment proved to be more than both prescient and profitable. Case in point is Callaway’s most recent financial report showing the company’s net revenue grew 97 percent to $3.1 billion for the full year ending Dec. 31, 2021, compared with the previous year.
And most remarkable about Callaway’s record 2021 financial results was the performance of its Topgolf business segment, which contributed $177 million of the $281-million increase Callaway reported in its record $445 million of adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). Considering Callaway now can account for a full year of Topgolf earnings, the company is projecting $1.5 billion in Topgolf revenue alone in 2022.
“Obviously we’ve got wind in our back in golf overall so that has been helpful,” Brewer said in mid-February just days after an upbeat earnings call with Wall Street analysts. “It’s great for the game and great for all of the businesses in and around the game. But also, with the transformational merger with Topgolf, what that does for our company and candidly for the game of golf going forward, is lots of fun and exciting to be part of.
“Golf is evolving. I grew up around traditional golf and I love it. I caddied growing up; I worked in a golf shop; I played in college…And that game is a wonderful game, but it wasn’t growing very quickly, and it wasn’t very accessible. It didn’t appeal to large portions of our country or the world. What’s evolving, in addition to all the wind in the back of traditional golf that’s benefiting from all the changes that’s come from Covid and remote/hybrid work life, is this whole new modern off-course experience.”
It's an off-course type of experience that attracted 12.1 million participants in 2020, according to the National Golf Foundation, nearly equal to the number of 12.6 million participants who played only traditional on-course golf. The NGF study cites that 12.2 million people tried both forms of “golf.”
“There’s a whole new modern off- course golf that is already as big as on-course golf in terms of the participation, and it’s going to be typically bigger,” Brewer added. “It appeals to a more diverse, younger and wider universe of people.
“When you look at modern golf, it’s a combination of the game that I grew up around and the game of golf that I experienced and love, and this modern golf which is Topgolf and Five Iron Golf and other avenues such as Tiger’s putting venture (PopStroke). They’re all really just broadening the reach and the interest and the participation around the game. And they all kind of fit together to form one mosaic that is golf nowadays.”
Brewer is bullish not only on the growth of his company’s Topgolf business, but the overall 12.6 million number of players bouncing back and forth between the two forms of traditional and non-traditional “golf.” His company is betting big-time on the latter after investing $40 million in the Lakes at El Segundo.
“The traditional game at the same time is in a very healthy spot as well,” Brewer says, “so it’s a fun time to be a part of the whole ecosystem around it.”