Topgolf Callaway Brands Corp

NYSE:MODG

Earnings Call Transcript 2022-Q1

[Operator]

Good day, and thank you for standing by. Welcome to the Callaway Golf Company Q1 2022 Earnings Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Lauren Scott, Director of Investor Relations. Thank you. Please go ahead.

[Lauren Scott, executive]

Thank you, Ashley, and good afternoon, everyone. Welcome to Callaway's First Quarter 2022 Earnings Conference Call. I'm Lauren Scott, the company's Director of Investor Relations. Joining me as speakers on today's call are Chip Brewer, our President and CEO; and Brian Lynch, our Chief Financial Officer. Patrick Burke, Callaway's SVP of Global Finance; and Jennifer Thomas, our Chief Accounting Officer, are also in the room today for Q&A.

Earlier today, the company issued a press release announcing its first quarter 2022 financial results. In addition, there is a presentation that accompanies today's prepared remarks and may make it easier for you to follow the call. This earnings presentation as well as the earnings press release are both available on the company's Investor Relations website under the Financial Results tab.

Most of the financial numbers reported and discussed on today's call are based on U.S. generally accepted accounting principles. In the instances where we report non-GAAP measures, we have reconciled the non-GAAP measures to the corresponding GAAP measures at the back of the presentation in accordance with Regulation G.

Please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statements contained in the presentation and the press release for a more complete description.

And with that, I would now like to turn the call over to Chip Brewer.

[Oliver Brewer, executive]

Thank you, Lauren. Good afternoon, everyone, and thank you for joining us today. To start, I want to thank all of the analysts and investors who joined us in person or online for our Investor Day on April 26. I speak for our whole leadership team when I say that we enjoyed having the opportunity to interact with you, and hope you walked away with a better understanding and appreciation of our business strategy and vision for the future. If you missed our event, I encourage you to review the materials on our IR website as you'll continue to hear us reference our growth framework as we track towards our long-term goals.

Shifting to Q1. I'm pleased to report a very strong start to the year with all 3 of our business segments contributing to our success. Total net revenue was just over $1 billion, up 60% year-over-year on a reported basis or up 31% on a pro forma basis, which includes Topgolf revenue for the full quarter of last year.

Flow through to the bottom line was strong as well, with adjusted EBITDA of $170 million, up 33% on a reported basis or up 31% on a pro forma basis. These results clearly show the continued momentum in our business and give us increasing confidence as we look out over the full year, and the long term.

Shifting to our segment overview. I'll first start with Topgolf's Q1 results. The Topgolf team put up another outstanding quarter. At the time of our last earnings report in February, Topgolf's venue business had been impacted by the reduced traffic in a lighter events business due to Omicron. However, as the quarter progressed, this early softness was replaced by a strong resurgence in demand. In March alone, same venue sales versus 2019 were up approximately 10%, which drove full quarter same venue sales up 2%, thus beating our February earnings call forecast of down slightly.

New venue openings remained on track in Q1 and continue to open extremely well. During the quarter, we opened 1 new owned and operated venue in Ontario, California and 1 new franchise venue in Germany. Additionally, in mid-April, we opened our new El Segundo location in Los Angeles, California. I'm happy to report that all of these locations are exceeding expectations as the venues team continues to impress and our brand appears to be building momentum.

As a result of these terrific results, we're increasing our same venue sales projections for Q2 and the balance of the year to up high single digits versus 2019. This would put our full year same venue sales up an impressive mid- to high single digits.

Operating margins also remain healthy, as Artie and the team have been able to take price as well as drive both increased event business and overall venue efficiencies. This combination is allowing our overall margins to outpace any inflationary pressures, all while maintaining a superior guest experience.

Turning to the Toptracer business. We installed 1,159 new bays in Q1 and believe we are on track for 8,000 or more bays this year. Feedback on the product and demand remains strong, plus we're building resources to ramp our installations.

Taking a step back, I hope we can all agree that this is quickly becoming a proven business, and it has a track record of success across any size, geography, climate, you name it. Our ability to continue to put up quarter after quarter of successful results makes us increasingly confident in this unique business' long-term outlook as presented at the Investor Day.

As we look over the next few years, we believe Topgolf will be a significant source of long-term value creation. Already in 2022, it is forecast to be our largest segment by revenue. And even with the strong growth forecast across our other business segments, this segment alone is expected to account for more than half of our total adjusted EBITDA by 2025.

Topgolf is the keystone of our modern golf thesis. It already is the dominant leader in the dynamic off-course golf industry, and we believe it will maintain this position given its significant growth prospects ahead.

Moving to Golf Equipment. This business had another excellent quarter with revenue up 24% year-over-year. As we mentioned at the investor conference, we expect this segment to be up 10% for the full year. We continue to see strong demand globally for Golf Equipment, especially from avid golfers. According to Datatech, in the U.S., despite comparatively poor weather conditions this year, Q1 hard goods sell-through was down just 2.8% versus 2021 and remained up 44.5% over 2019.

Outside the U.S. in key markets such as Japan, Korea and Europe, we saw Q1 hard goods sell-through up nicely year-over-year. Also, as the fitting portion of the season opens up, we are seeing market share gains for our 2022 products, especially our Rogue ST Drivers and Ferry Woods as well as our Chrome Soft golf balls. For Q1, we finished as the #1 hard goods brand in the U.S., and in March, we delivered a new record U.S. golf ball market share of 22%.

On the manufacturing side, our supply chain is continuing to perform well. And although supply has not yet caught up to demand, we believe our strong partnerships, scale and regional diversification have provided and will continue to provide a competitive advantage in being able to deliver products to our customers.

Lastly, the Apparel, Gear & Other segment had a strong quarter with positive momentum across all of our brands. Callaway's business has remained strong globally with our Apparel business in Asia performing well, and our Gear business, namely golf bags and gloves, delivering both market share and revenue increases. As you may recall from Glen Hickey's presentation during the Investor Day, increasing our market share in the soft goods category will be a key opportunity within the segment. So we're very pleased with these results.

Meanwhile, TravisMathew had another outstanding quarter, continuing the strong brand momentum across all channels. Our own retail comp store growth was up a stunning 50% in Q1. In addition, TravisMathew announced last week that it's launching its first dedicated women's apparel collection. While this first rollout is more of a preliminary collection and not a major source of revenue yet, with women accounting for over 25% of the purchases made through TravisMathew's direct-to-consumer channels, we are both confident in and excited about the opportunity here. Throughout this year, we plan to continue to test and expand the offering and we have a more robust launch plan for 2023.

As communicated at our Investor Relations Day, we see the TravisMathew brand eclipsing $300 million in revenue and $50 million in adjusted EBITDA by the end of this year. They have impressive momentum, and we see a clear path to continued growth ahead.

Lastly, the Jack Wolfskin business continues to make good progress. Being a European-based brand, they are dealing with a number of macro headwinds, but I'm pleased to report that their new branding campaign and products are being very well received, both based on sell-through of the current products and prebooks for the future. We believe this brand is on strong footing and position for growth ahead. We outlined what we believe is a compelling long-term vision for the brand and its financial objectives at our Investor Day.

When looking at the segment on the whole, we expect the Apparel, Gear & Other segment to deliver approximately $1 billion in net sales for this full year.

In closing, in light of the strong start to the year and our confidence in the key business drivers by segment, we are raising our financial outlook for the balance of the year. We also want to take this moment to reiterate our belief that Callaway is a unique and compelling investment opportunity that will create long-term shareholder value. Our brands have momentum, and they operate in business segments that are attractively positioned in today's world.

We are advantaged by scale within the modern golf industry, with unmatched global reach to both the traditional golf consumer and the growing off-course player. Our high barriers to entry act as a layer of protection against new competition. And our diversification allows us to mitigate the effects of any potential downturns in any 1 segment while also presenting attractive synergy opportunities.

We are confident in our ability to deliver the growth projections laid out at the Investor Day and believe our 2025 target of surpassing $800 million in adjusted EBITDA will be achieved by continuing to execute our proven strategy for growth. As stated at the Investor Day, we don't have to do anything fundamentally different. We just have to continue to do the things that we have consistently shown that we can and are doing.

And with that, I'll hand the call over to Brian to discuss our financials and outlook in more detail.

[Brian Lynch, executive]

Thank you, Chip, and good afternoon, everyone. As Chip mentioned, 2022 is off to a strong start, and we are very pleased with our financial -- with our first quarter financial results. We've been saying that we believe there has been a structural shift in the market that will benefit each of our businesses, including increased interest in golf, momentum behind active lifestyle apparel brand and an increased desire for leisure and entertainment, such as Topgolf, hiking and other outdoor activities. And we believe our first quarter results reflect this shift.

Now turning to our financial results in more detail. For the first quarter, consolidated net revenue was $1.04 billion, an increase of 60% compared to our reported Q1 2021 results. As a reminder, we acquired Topgolf on March 8, 2021, and therefore, our 2020 first quarter results -- our 2021 first quarter results include only 1 month of Topgolf. If the full 3-month Topgolf results are included, our revenue increased 31% on a pro forma basis. Changes in foreign currency rates had a negative $21.2 million impact on reported first quarter 2022 net revenue compared to the same period in 2021.

Looking at our segment performance. Golf Equipment had another excellent year, generating $468 million in revenue, driven by continued high demand and improved supply in our golf clubs and balls business. Topgolf contributed $322 million in revenue and reported same venue sales growth of 2.3% compared to 2019 as guest turn out in the latter part of the quarter, especially in our Events business, outpaced some slowness in January and February due to Omicron.

Lastly, Gear & Other revenue of $250 million resulted from a 45% increase in apparel sales and a 29% increase in Gear & Other. Total cost and expenses were $934 million on a non-GAAP basis in the first quarter of 2022 compared to $555 million in the first quarter of 2021. Of the $379 million increase, Topgolf added an incremental $227 million of total costs and expenses, with the majority of that increase caused by the additional 2 months of Topgolf costs and expenses versus last year. The balance was driven by variable expenses in the Golf Equipment and Apparel, Gear & Other businesses; increased support at corporate; and the impact of increased freight costs and other inflationary pressures.

First quarter 2022 non-GAAP operating income was $106 million, up $9.5 million year-over-year. Including January and February for Topgolf, pro forma non-GAAP operating income would have increased $27.6 million or 35% year-over-year, and operating margins would have increased slightly to 10.2% compared to 9.9% for the first quarter of 2021, despite the negative impact of foreign currency, freight expense and other inflationary pressures previously mentioned.

Diving a bit deeper into some of the inflationary pressures we are seeing. At Topgolf, we are seeing some inflationary pressures on food and beverage and associate wages, which we are more than covering through a combination of sales leverage, operating efficiencies and pricing. We have made relatively modest use of price so far this year. And while our margins are all trending positively, we believe there is an opportunity for additional price increase should we need to offset costs further in the future.

In the non-TopGolf business, we are fully covering the negative impacts of inflationary pressure on raw materials or components via price increases or positive volume variances. Gross margin in the non-Topgolf business, however, were impacted by changes in foreign currency rates as our hedging gains are included in other income. Gross margins were also affected by increased freight costs as freight cost increases ramp throughout 2021, and we also shipped more by air in the first quarter of 2022 to compensate for supply chain disruptions at the end of last year. Year-over-year comparison to freight costs should improve as the year progresses.

Overall, we are very pleased with the increase in our consolidated pro forma operating margins and how our businesses are absorbing these various macroeconomic pressures.

Moving back down the income statement. Non-GAAP other expense was $22 million in the first quarter compared to $6 million in Q1 2021, primarily due to a $16 million increase in interest expense related to Topgolf. Non-GAAP earnings per share was $0.36 on approximately 201 million shares compared to $0.62 per share on approximately 125 million shares in the first quarter of 2021. The increased share count was primarily related to the issuance of additional shares in connection with the Topgolf merger, along with an accounting change that took effect on January 1, 2022, which requires that we include 14.7 million shares related to the assumed conversion of the company's convertible notes.

I want to remind you that applicable accounting rules do not give any effect to our capped call in calculating EPS. But upon settlement, they should reduce the number of shares we are required to deliver.

When calculating our earnings per share under this new accounting method, you would need to add back approximately $1.6 million of after-tax convertible debt interest expense to net income before dividing by the share count. If you are calculating our enterprise value with a convertible note on an if-converted basis, you should exclude the $259 million convertible debt from your calculation and use approximately 200 million as the diluted share count.

Lastly, Q1 adjusted EBITDA was $170 million, up $42 million or 33% over Q1 2021 on an as-reported basis or up $40 million or 31% on a pro forma basis when including Topgolf results for the full 3-month period. For Q1 2022, Topgolf contributed $42 million of adjusted EBITDA.

Turning to certain balance sheet items. We remain in a strong financial position with ample liquidity. As of March 31, 2022, available liquidity, which is comprised of cash on hand and availability under our credit facilities, was $576 million compared to $713 million at March 31, 2021. The decrease was driven by planned working capital increases in the Golf Equipment and our soft goods businesses to support growth as well as continued investment in Topgolf. As a reminder, we expect Topgolf to be self-funding in 2023 and cash generating in 2024.

At quarter end, we had total net debt of $1.710 billion, including venue financing obligations of approximately $625 million related to the development of Topgolf venues.

Our net debt leverage ratio was approximately 3.5x at March 31, 2022, compared to 5.0x at March 31, 2021. Our leverage ratio on a funded debt basis was even lower.

Consolidated net sales receivable was $413 million as of March 31, 2022, compared to $329 million at the end of the first quarter of 2021. The increase was primarily driven by the increase in revenue.

Our inventory balance increased to $552 million at the end of the first quarter of 2022 compared to $534 million at the end of the fourth quarter of 2021 as we increase supply to meet forecasted demand. The quality of our inventory is good.

Capital expenditures for the first quarter of 2022 were $74 million net of REIT reimbursements. This includes $58 million related to Topgolf. For the full year, we expect total CapEx of approximately $315 million, net of REIT reimbursements, including approximately $230 million for Topgolf and $85 million for the non-TopGolf business.

Now turning to our full year and second quarter 2022 outlook. Given our strong Q1 results and confidence in the opportunity for growth throughout the year, we are increasing our full year 2022 revenue expectations to $3.935 billion to $3.970 billion. This estimate assumes approximately $1.56 billion in revenue for Topgolf for the year, approximately $1 billion in revenue from the Apparel, Gear & Other segment and an increase of approximately 10% in our Golf Equipment segment revenue as compared to full year 2021. Our full year adjusted EBITDA also increased and is now projected to be $535 million to $555 million, which assumes approximately $225 million to $240 million from Topgolf.

To help understand the guidance update, we beat the midpoint of our Q1 guidance range by approximately $32 million. This amount included approximately $10 million in foreign currency benefits, including hedge gains. Excluding these benefits, we beat Q1 by approximately $22 million on an operational basis.

We are increasing our full year adjusted EBITDA guidance by $42.5 million, including an additional estimated $7 million of negative foreign currency impact based upon recent rates. In other words, excluding this additional foreign currency impact, we are increasing full year adjusted EBITDA guidance by approximately $49.5 million from the midpoint on an operational basis. This represents the $22 million noncurrency impact of Q1, plus an additional noncurrency increase of $27.5 million for Q2 to Q4.

For the second quarter, we plan to deliver between $1.085 billion and $1.105 billion of net revenue and $185 million to $200 million in adjusted EBITDA.

We are not immune to foreign currency and inflationary pressures this year, but we believe we can outrun them. The most substantial factor for the year, which we have quantified in our press release today, relates to foreign currency impacts. For the full year compared to 2021, we expect FX to have a negative revenue impact of approximately $115 million. In Q2, we expect the revenue impact to be approximately $39 million.

Overall, we are pleased with the strong start to the year and are excited about the balance of the year. That concludes our prepared remarks today, and we will now open the call for questions. Operator, over to you.

[Operator]

[Operator Instructions] Your first question comes from the line of Randy Konik with Jefferies.

[Randal Konik, analyst]

I guess, Brian, I wanted to ask about the rise. You put it well on the changes to your annual guidance. I guess I want to go back to the Analyst Day, you gave us some really good color on some expected revenue and cost synergies you were going to expect going forward. So can we go over those, quantify those again one more time for those who may not have heard that, but also give some qualitative things that you're working on that you see to be helping those synergies come through the P&L over the next few years.

[Brian Lynch, executive]

Sure, Randy. With the synergies, we had quantified it would be approximately $225 million in revenue and $100 million of EBITDA synergies, which includes $15 million of cost synergies. And you're starting to see them already. In fact, you would have started to see some synergies even before we closed the transaction. You might have noticed between the signing of the transaction and the closing, you saw Jon Rahm sporting the Topgolf logo. And that's just 1 example of some cross marketing synergies.

But the other ones are also, we've accelerated the venue expansion faster than Topgolf would have as a stand-alone. We are increasing the ability to enter into contracts for new Toptracer bays. I mean, all the places that Toptracer wants to get into, our Golf Equipment group already have strong relationships. So that's something we consider to be a competitive advantage.

And there's others, there's lower cost of debt for them. We're sourcing their clubs and balls and managing the Toptracer inventory where we have incremental revenue with the Topgolf retail stores. And that's just things you're starting to see develop, and they'll continue to develop.

But then there's even longer-term initiatives. You remember at Investor Day, Glen talked about we're in process of hiring a consumer data expert to leverage all the consumer data we have access to. Ultimately, a lot of that and having that access gives us a competitive advantage using our digital abilities there, and then we'll be able to sell more equipment and drive business to the venues.

[Randal Konik, analyst]

Really helpful. And then I guess one other question I wanted to kind of almost repeat from the Analyst Day that I asked. Given the strong results this evening, and then again, that rise or the raised EBITDA outlook or guidance for the year, you're well on your way to that $800 million, at least, number for, I believe, 2025.

So when we kind of talked about that at Analyst Day, you kind of made the comment that even if there were some Golf Equipment pull back, which you're not seeing, you could still kind of hit those numbers. So at that time, I kind of asked about any type of areas of conservatism or opportunity you saw in the financial model that kind of gave you that extra comfort or confidence in hitting that $800 million EBITDA goal. So just kind of expand upon that a little bit and give me some perspective there.

[Brian Lynch, executive]

Sure, Randy. We did feel comfortable that even if you had that pullback in golf, you could hit it. So if we didn't have that pull back, then obviously, we would do -- we would be able to do better and be either toward the high end or possibly above that range. If everything goes well, sure, there would always be upside. But not everything always goes well. So we're comfortable with where we're guiding to at this point. But with your premise starting with if everything went well, yes, then there could be upside.

[Oliver Brewer, executive]

Yes. And Randy, this is Chip. But the building momentum across all of the segments, obviously, gives us confidence, but especially so at Topgolf given the scale of that opportunity, which is even more significant than we foresaw when we entered into the merger. But you can see them really building momentum now on same venue sales, on profitability, proving out their thesis of being able to open and operate successfully the venues. That is just a wonderful business with really strong momentum now. And just to get to the $800 million, we said $450 million would come from Topgolf. We have strength across all the segments, but a really attractive opportunity at Topgolf that's building momentum.

[Operator]

Your next question comes from Daniel Imbro with Stephens.

[Daniel Imbro, analyst]

I want to start on the Golf Equipment side of the house. I mean, obviously, golf balls and golf clubs continue to kind of outperform Street expectations. I'd be curious, can you talk about how much is an increase in unit sales versus maybe pricing you've taken this year? And then just a modeling question. Are there any more launches planned for the back half of this year, either on the club or the golf ball side? Or was this a kind of launch everything in 1Q type year, I think? And can you remind us what last year was as well in terms of launch timing?

[Oliver Brewer, executive]

Sure. Daniel, it's Chip. So we are seeing great results in the Golf Equipment segment, driven by strong market conditions and market share gains here at Callaway. So very pleased with the results. We're driving some of our results by price and some by volume. So it's a little bit of both, and it varies a little bit by category. In the golf ball category, it's a little bit of price and significant volume increases. In the golf club category, it's a little bit the opposite. So a little bit more price, but also some volume gains as well.

We are planning to launch some product in the second half of this year. I'd call it modest, not a heavy cadence for the second half, but there will be product launches in the second half as there usually are, and that's roughly consistent with what it was last year.

[Daniel Imbro, analyst]

Helpful. And then moving to the soft goods side of the business. I mean, what Ryan and the team at TravisMathew have done, it seems really impressive. And I guess, as we march towards, I think, you said a $1 billion sales opportunity at the Analyst Day, what's the right long-term margin structure for that business? I mean can we continue to see margin leverage from the targets you've given this year? And kind of what are we marching towards in terms of profitability within that soft goods and apparel side?

[Oliver Brewer, executive]

Well, we're just thrilled with that business. We're really excited about the entire segment. But the TravisMathew business in itself has been a home run in building great profitability and great momentum, and that's why we carved out some numbers to give you a good indication of how successful that business is and the scale that it's already achieved, right?

So we expect it to be over $300 million in revenue this year, over $50 million in EBITDA. And absolutely, we would expect operating leverage as it continues to scale from there. And every indication is that it's going to continue to do that.

Again, just citing a couple of metrics. The comp store growth in Q1 of 50%. I never expected to be reporting a 50% comp store sales growth. But that -- and that's off of last year, which was up significantly. So very, very pleased with that business and the opportunity going forward.

[Daniel Imbro, analyst]

And just to clarify, when you report comp store, is that just the owned stores? Or does that include the wholesale side of like organic growth in the wholesale side of the business -- at TravisMathew?

[Oliver Brewer, executive]

That is just our own stores because it's the cleanest data that we have, and only those that we've owned and operated over a consecutive year, so it's directly comparable.

[Daniel Imbro, analyst]

And how much of the Travis revenue is same-store versus other, I guess, today?

[Oliver Brewer, executive]

It's a minority, but we think it gives you the cleanest representation or a very clean representation of the momentum of the brand. So we're not breaking out what is retail versus wholesale versus e-comm, the 3 primary channels at this stage. Wholesale is the largest channel and we have strong momentum across all of the channels.

[Operator]

Your next question comes from Kevin Heenan with JPMorgan.

[Kevin Heenan, analyst]

Congrats on the strong results. I guess, I just wanted to ask on the supply side, I guess, how much of a headwind was that to your 1Q results -- and how are you thinking about product supply and inventory as you move through the balance of the year?

[Oliver Brewer, executive]

Sure. Kevin, it was definitely -- it continues to be a challenge on the supply side, but our team has done a wonderful job. So we're managing through that. And we think it's actually a competitive advantage. Walking by category, Golf Equipment continues to be chasing demand.

There were shutdowns in Asia last year in the fall and early winter. Those had us -- forced us into a position of accelerating production schedules and airing more product in Q1 than we would have normally done in order to hit what we think are very attractive and nice results. But air freight is more expensive than ocean freight. And as you know, freight, in general, has gone up. So there are some headwinds associated with that.

But the team is working through it very well, and we're not anticipating it being a significant drag on us going forward. And in fact, we see it as a competitive advantage and able to drive nice growth off it.

[Kevin Heenan, analyst]

Great. And just as a quick follow-up, within your up 10% outlook for the Golf Equipment business, can you just parse out maybe how you expect balls versus clubs to look for the full year?

[Oliver Brewer, executive]

Sure. We're not going to break out forecast individually, but the golf ball business is growing faster for us than the club business, but we're gaining market share in both of them. I mentioned in the U.S. being #1 hard goods brand in the U.S. But we're also starting to hear a really great and record market share in golf ball in March. So we have our high-water mark.

We seem to have a new high-water mark every year, which is obviously a nice trend. But in golf ball, March of this year in the U.S. was our latest new high-water mark. And we're also gaining share in the Rogue Drivers in Fairway Woods really globally now. So great result on that. We'll see -- we see both of them being up for the year, probably ball even a little stronger than clubs.

[Operator]

Your next question comes from Michael Swartz with Truist.

[Michael Swartz, analyst]

Just wanted -- maybe a question for Brian. I think you talked about your pricing is offsetting and I guess, volume is offsetting some of the inflationary pressures this year. Is there any way to just quantify for us what inflation has meant to you this year, either absolute or maybe just the increment versus last year?

[Brian Lynch, executive]

It's definitely a factor. I'd say we're covering all that without the pricing. I'd say the biggest factor for Q1 was probably FX, and then a little bit of the freight expense as well. As Chip mentioned, we had airfreight more in -- so I think those are probably the 2 biggest factors we weren't covering and having some impact. We do think that abates as the year goes on. So I would expect for the full year, you would see operating margin and EBITDA margins to be flat to up slightly.

[Oliver Brewer, executive]

Yes. And Michael, it's very difficult to answer the question because of the segments of our business, right? So we'd have to give you -- you can't really blend inflation on nachos with inflation on golf clubs and raw materials in golf ball and apparel. They're all -- we're seeing inflation like others are in various aspects of our business, but we're able to offset it through efficiency gains, pricing.

We're very pleased with our ability to manage in all areas, and happy to get into more specifics in the after-call or if you'd like, but it's -- we're not trying to avoid the question on a quantitative basis. It just doesn't make sense across the entire business to try to quantify it.

[Michael Swartz, analyst]

Understood. That's fair enough. And then just a second question on the Topgolf same venue sales guidance. You've increased it from low single digit to up mid to high for the full year. Just maybe walk through some of the moving pieces there. I guess, just in a simplistic fashion, I mean, how much of that would you ascribe to volume versus maybe pricing?

[Oliver Brewer, executive]

Yes. It's -- so in a definition of volume versus pricing, it's a little bit of both, to be honest with you. So we're -- but the other color I would give you is that we've seen good walk-in traffic there for a while really since mid last year, if not even potentially earlier.

You're seeing building momentum in the Events business. Events business has been what we've called, and we'll break that down into social events and corporate events. Social events has been strong for some time. It really surged even more this last quarter. We have certain plans and strategies to further unlock that.

And then corporate events has been the only category that has been down since pre-COVID. And corporate events is now starting to show some real positive signs. And in March, we saw corporate events comp positively on a year-over-year basis. So seeing really good signs across all of the metrics or different sources of what you'd call traffic also with the ability to drive efficiency gains and pricing.

[Operator]

Your next question comes from Kate McShane with Goldman Sachs.

[Patrick Hollander, analyst]

This is Patrick Hollander on for Kate. There obviously seems to be a bit of heightened concern right now around the economy, just given higher inflation, lower consumer confidence. Given that these concerns are kind of coming up as we enter the warmer months and golf season, we just wanted to ask how you guys are kind of equipped to manage inventory levels this season if there is a further eroding of consumer confidence and a drop-off in demand for more discretionary categories, whether that's golf balls, golf clubs, apparel, things like that.

And then when we look at the inventory increase year-over-year, it's pretty significant. Just wanted to ask about how we should think about that increase from a price versus volume perspective?

[Oliver Brewer, executive]

Sure. Patrick, I'll take the first part. And first of all, Patrick, I want to reiterate that we are not seeing any slowdown in consumer demand. So I understand the angst, but at some point, we should look at the facts, and the facts are that we're not seeing it on a global basis. And if there was a change in that, we would be able to react. We have a very strong process for managing inventory. We're still chasing right now demand. But if that was able to -- that was to turn on us, we feel like we'll be able to manage that inventory process efficiently.

One of the things that if you -- and you were at the Investor Day, as you heard Mark say, I make it a point with the team that we don't like to have excess inventory. That's one of the things that is absolutely nonnegotiable with us. So we're very attentive to that.

And then in terms of the quantity of the inventory, Brian, do you want to comment at all or...

[Brian Lynch, executive]

Sure. Yes, there's a couple of things going on there. One, there's actually $80 million of inventory in transit as of the end of the quarter. So that's a big piece of the up. The other parts are -- there's going to be some price in there because there have been some cost increases, and there's also units as well. So I think it's just a combination of all 3.

[Oliver Brewer, executive]

Yes. Even just raw materials, we're building raw material supply and some of the -- because of the longer lead times. So...

[Operator]

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

[Susan Anderson, analyst]

Nice to see another strong quarter. I'm curious for the Golf Equipment business. How much of the growth was due to restocking, I guess, versus just regular sell-throughs?

And then also, can you give some color on how you expect the quarters to flow through this year to get to your 10%? Are you expecting any nuances we should think about or compares from last year?

[Oliver Brewer, executive]

Yes. So -- yes, on the Golf Equipment side, some portion -- so we were up 24% in our Golf Equipment segment in Q1. Some of that was restocking inventory and establishing position in the field for sure. We saw significant growth in the market internationally in Q1, and the market was -- essentially, it was down 2.8% according to Datatech, or essentially flat in Q1, but we also gained a little bit of share.

So in Q1, a good portion of that was a restocking, but we're seeing all the right signals and we're obviously -- have reiterated the 10% up for the full year. We're not providing a further breakdown of the 10% by quarter at this point, so we can't add any more color on that, but hopefully answered the first part of the question.

[Susan Anderson, analyst]

Yes. And I guess just on the restocking, it sounds like you mentioned you're still chasing. So I guess, is there more restocking to be had as we look into second quarter?

[Oliver Brewer, executive]

A little bit, Susan. So we're starting to get closer to normalized inventories out there, but they're still low. We're still chasing demand. We said that we expect sometime at the end of Q2, maybe Q3 to be more caught up, if you would. And -- but that's all based on our expectations of demand. And obviously, expectations could be high or low. But the pinch points that we would have are steel shafts and some of the raw materials on golf ball, but we're obviously managing it very well and not, at this point, concerned on the supply side or the inventory side.

[Susan Anderson, analyst]

Okay. Great. And then if I could just add one follow-up on Topgolf. The 10% that you said you were running at the end of first quarter, I guess I'm curious if that continued in the second. And I know you raised your annual guide to mid- to high single digits. But I guess, what would keep it from continuing to be at the 10% demand rate as we look forward? Or do you think some of that was maybe also pent-up demand after people were more locked down from Omicron?

[Oliver Brewer, executive]

Well, Susan, the difference between high single digits and 10% is a mighty fine cut, first of all, for the level of guidance and the movement in the macro environment out there. But we certainly saw continued strength through April, enough so that we could call the full -- the rest of the year up high single digits, and -- which is obviously a significant move, shows the momentum of that business.

And we're starting to see a business where we're guiding to high single digits, same venue sales growth. That's new ground and obviously a really positive signal and source of value for the investment community.

[Operator]

Your next question comes from Rudy Yang of Berenberg.

[Chen Yang, analyst]

Just on the price increases, when you mentioned you have kind of room to factor more in. Is that kind of just reserved ammunition for now as you kind of watch for changes in the macro environment? Or are there kind of set plans already to kind of layer that in, in kind of Q3, Q4?

[Oliver Brewer, executive]

We absolutely have set plans to manage inflation, which includes price increases throughout our various segments. So that is part of our business planning and baked into all of our projections now and into next year. And we've been -- we're fortunate that the segments we're in have strong consumers and high disposable incomes, avid passionate about the segments that we participate in. We have not seen any pushback or negative repercussion associated with any of the moves that we've made at this point in time.

Not sure if that answers your question directly. But again, given we have 3 segments, talking about price increases in specifics gets a little challenging unless the question gets more specific.

[Chen Yang, analyst]

Got it. No, I appreciate the commentary there. And then on top of with kind of the corporate events business, do you guys kind of see that coming back to less than where it was as a percentage of total Topgolf sales, just given the weakness and especially kind of considering the growth of all the other aspects of Topgolf's business?

I know you kind of mentioned social kind of surged more -- social events kind of surged more this last quarter. So just curious on where you're thinking in terms of in terms of the recovery for corporate events as a percentage of Topgolf's total business as it kind of recovers in the future.

[Oliver Brewer, executive]

I think as it recovers in the future, it has the opportunity to be a similar percentage as it has been in the past. And that ability to manage channel mix will be one of the levers and opportunities for Topgolf to manage its overall performance.

[Operator]

Your next question comes from John Kernan with Cowen.

[Krista Zuber, analyst]

This is Krista Zuber on for John. Just 2 questions for us. Most have been answered. Just on sort of the gross margin, I was wondering if you could directionally walk us through some of the puts and takes on the outlook for gross margins in Q2 in second half for sort of the golf product margins versus Topgolf side of your business?

[Oliver Brewer, executive]

Gross margins, Q2, if you want to -- yes, I don't know whether we're going to provide granularity by quarter by segment...

[Brian Lynch, executive]

Freight -- for the soft goods business and the Golf Equipment business, freight will moderate as the year goes on. It was probably a $25 million impact in Q1, and it won't be that for the full year. It will be $40 million for the full year. So if that will moderate, it will help margins as we go along.

[Oliver Brewer, executive]

Right. And then our Topgolf margins have been excellent. So we expect them to stay excellent. The gross margins in all the business has been quite good, to be honest with you, and the operating margins and EBITDA margins have been even better. Some of what we saw in Q1, we had -- the freight was an acute pinch point for us in Q1 because of airfreight.

And then some of what you see in gross margins are also some -- it's a little bit of geography because -- and what I mean by geography is on the P&L, when we hedge, we show the gain in other income, right? And because -- but it will look like decreased gross margin, but we've covered it with the hedges, which shows up elsewhere on the P&L.

[Krista Zuber, analyst]

Okay. Got it. And then just finally, just in terms of the promotional environment, with your confidence in the sustained demand for both Golf Equipment and the soft goods side of your business along with Topgolf, just curious to know what you're seeing really in terms of promotional environment across your channels and kind of what's embedded in your expectations for the back half along this line?

[Oliver Brewer, executive]

Yes. We're not seeing any meaningful promotion. And so it's not a promotional environment. It might be a little bit more promotional in the second half of the year than it was last year, but it's not going to be -- I would be shocked if it was highly promotional. And those expectations are consistent with that have been baked into our forecast.

[Operator]

Your next question comes from Joe Altobello with Raymond James.

[Joseph Altobello, analyst]

I guess, first, a couple of questions -- points of clarification, if I could, on the Datatech data. I think you mentioned it was down 20%. First, is that a U.S. or a global number? And second, is that a dollar or unit number?

[Oliver Brewer, executive]

That is a U.S. hard goods dollars. And then the rest of the world was up, in fact, up double digits.

[Joseph Altobello, analyst]

Okay. Okay. So if I compare that to your equipment revenue, obviously, it's a little bit of apples and oranges, and it sounds like you guys did gain some share. But where do we stand in terms of refilling the channel from an inventory standpoint? And is that something you think that could extend into '23? Or do you think you can fully refill the channel here in '22?

[Oliver Brewer, executive]

I think that we've gotten closer to more normalized inventory levels in the Golf Equipment channel now, but we're still chasing in certain areas. We're still chasing overall demand. And sometime in Q2 or Q3, we'll probably get to low but more normalized inventory levels in the channel.

[Joseph Altobello, analyst]

Okay. Okay. Just one last one for me on Topgolf, and I apologize if I missed this. Are we thinking 10 or 11 venues this year? And remind us what the cadence is? I know it's a back end weighted, in fact, very fourth quarter weighted, but how should we model that out for the rest of the year from an opening standpoint?

[Oliver Brewer, executive]

Yes. We're thinking 11 is our expectation for this year, and as well as we think we can hit 11 going forward at this stage. So that is one of our upticks in expectations that we revealed at the Investor Day. There's...

[Brian Lynch, executive]

Back-half weighted for sure.

[Oliver Brewer, executive]

Yes, back-half weighted. So if I remember correctly, it's 5 in Q4, which is so very back-half weighted. We have opened now 3. 2 in Q1. Actually, only 1 -- 1 owned and operated in Q1. Another one, El Segundo opened in April, and then there'll be 5 in Q4.

[Joseph Altobello, analyst]

Okay. 5 left in Q4.

[Operator]

Your next question comes from Casey Alexander with Compass Point.

[Casey Alexander, analyst]

I'm sure it's happened before, but I can't remember a time where every product category was up year-over-year and every geography was up year-over-year. I mean that type of -- I just don't remember.

[Oliver Brewer, executive]

I agree with you. I usually look for something for -- to poke at there, and there isn't. It's not as evident as it's -- we're really seeing strength across all geographies and all business segments, which we did -- in fairness, we did say during our initial guide that we expected to grow every category or every business segment in every geography. So far, we're on track.

[Casey Alexander, analyst]

It's pretty remarkable. And I would say after 2 years of sleepless nights, I wonder -- would love to know what keeps you up now. And secondly, you just completed a $50 million share repurchase program. And I mean, never have we seen the fundamental performance of the company so strong at the same time the stock has performed so poorly.

So you could obviously authorize another one and buy all you want. How does the Board feel about another share repurchase program and taking advantage of the weakness of the stock? Because I do think there's a time period where obviously, all of this changes. But -- so what keeps you up at night? And what are the thoughts about an additional share repurchase program?

[Oliver Brewer, executive]

Plenty to still keep me up at night, Casey. But the fundamental difference, I agree with you. I've never, in my 20-plus years now of running a public company, seen as big a fundamental difference between the performance of the company or -- and the share price. So that's -- this is new ground for me. I've seen it, to some degree, but nowhere near where it is right now. So to a degree, that keeps me up at night. But obviously, overall, extremely pleased with the direction of the business and the operating results.

And in terms of the share buyback, we do look at buying back stock opportunistically, and we've shown that. But as a matter of policy, we can't comment on future capital allocation plans. So I've got to pass on that one for right now, and I appreciate your comments.

[Casey Alexander, analyst]

All right. And secondly, the growth of the ball business has been steady and sort of one step at a time. How do you get it sort of next level? That's -- it's -- if you know what I mean. There's a next level out there, and it's one where it's not 1 and the rest, it's 1 and 2 and no one else matters. And that's the next level. And how do you get there?

[Oliver Brewer, executive]

Casey, that's all good, fair comments. And my only answer to you, well, I think it is doing what we've been doing. We've reinvested to the point now where we have an ability to make a better golf ball than the rest of the world, we believe. And I'm sure -- I know for a fact that there are others who would vehemently disagree with that.

But you're seeing some signal from the market, and you're seeing it over time. And if those trends continue, and boy, they have continued now for a couple of years, then the outcome that you just mentioned will be the logical outcome where you'll have a #1 and such a strong #2 that it will differentiate itself. And we're certainly plowing forward on that with that as a goal.

[Operator]

Your last question comes from [ JP Woolen ] of ROTH Capital.

[Unknown Analyst]

Just one for you here tonight. On the women's collection for TravisMathew, just kind of curious to know what you guys are looking for as you kind of roll out some of the first collections here. Just kind of how you're thinking about it? And then on top of that, as we kind of think about the long-term opportunity with TravisMathew, I know at Investor Day, you said maybe net sales of $500 million, even up to $1 billion. Just kind of curious to know, does that long-term thinking incorporate what you could be doing in women's? Or would women's be an incremental opportunity to that?

[Oliver Brewer, executive]

Sure, JP. So it does include women's. So we're very optimistic there. But what you're seeing us do is a methodical and logical, hopefully well-organized approach to what could be a very significant category expansion for the brand. And so we're -- we hired resources to put it, dedicate to this well over a year ago. They have been working with the team to design and develop this new collection. We think it looks fantastic. More importantly, the women that have purchased it, seen it, given feedback on it are raving about it. The initial sell-through was outstanding.

But it gives us a chance to test. It gives us a chance to test what different styles, what different cuts, what different fits and fabrics and approaches are going to resonate most with that very important consumer, which already frequents the TravisMathew brand because even though it was 100% of men's brand, again, through our direct-to-consumer channels, which is all of our e-comm and owned stores, which is the ones we can obviously measure this the most in, 25% of the purchases were women, I assume, buying it for their men, at least some men. And that's a pretty good sign for a brand to start with, but also gives you access to the category.

And you're going to see us really learning, testing, evaluating, creating excitement among the women, and then a more organized and significant launch in 2023.

[Unknown Analyst]

Great. And then just one more real quick follow-up. At Investor Day, you guys touched on kind of the strength of some of your golf partners and some of the smaller businesses. And I was just curious, is there any kind of seasonality in, one, some of these smaller range partners are thinking about possibly investing in Toptracer? Any seasonality around maybe in the winter seasons they're looking to make that investment? Or is it kind of constant throughout the entire year?

[Oliver Brewer, executive]

Yes. It's more or less constant, JP, but there does -- it is easier to shut down a range and do installations during the off-season. So there's a little bit of a -- provided that there's not snow and ice on the ground, so it's like in a mild climate, if there is an off-season, they would take a chance to get a shoulder season to put it in often as opposed to when they're busiest. If it's a deep cold climate, you're going to have to use it when the ground is not frozen and when there's access. So -- because you generally have to bring data and they have to provide data, lines and power to the range.

[Operator]

There are no further questions at this time. I will now turn the call back to Chip Brewer for closing remarks.

[Oliver Brewer, executive]

Well, I just want to thank everybody for joining us today. We're obviously delighted with the results across our business, and we look forward to joining you in a couple of months for the Q2 call. Thank you so much for dialing in.

[Operator]

This concludes today's conference call. You may now disconnect.