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Revenue Recognition | 9 Months Ended
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Sep. 30, 2021
Revenue from Contract with Customer [Abstract] |
Revenue Recognition | Note 4. Revenue Recognition The Company primarily recognizes revenue from the sale of its products and operation of its venues. Revenue from product sales include golf clubs, golf balls, lifestyle and outdoor apparel, gear and accessories, and golf apparel and accessories. The Company sells its products to customers, which include on- and off-course golf shops and national retail stores, as well as to consumers through its e-commerce business and at its apparel retail and venue locations. The Company's product revenues also include royalty income from third parties from the licensing of certain soft goods products. Revenue from services primarily includes venue sales of food and beverage, fees charged for gameplay, and the sale of game credits to guests. Service revenues also include franchise fees from franchised international venues, as well as revenue from gift cards, sponsorship contracts, franchise fees, leasing revenue and non-refundable deposits received for venue reservations. In addition, the Company recognizes service revenues through its online multiplayer WGT digital golf game. The Company's contracts with customers for its products are generally in the form of a purchase order. In certain cases, the Company enters into sales agreements containing specific terms, discounts and allowances. The Company enters into licensing agreements with certain distributors and, with respect to the Company's Toptracer operations, driving ranges and hospitality and entertainment venues. The Company has three operating and reportable segments, namely the Topgolf operating segment, the Golf Equipment operating segment and the Apparel, Gear and Other operating segment. On March 8, 2021, the Company completed its merger with Topgolf. The Company’s results of operations, therefore, include the operations of Topgolf from that date forward. Topgolf contributed $333,783,000 in net revenues for the three months ended September 30, 2021, and $751,873,000 for the nine months ended September 30, 2021, which includes approximately seven months of revenues since the completion of the merger. The following table presents the Company's revenue disaggregated by major product category and operating and reportable segment (in thousands):
|  |  | Operating and Reportable Segments
Three Months Ended September 30, 2021 |  | Three Months Ended September 30, 2020
| Topgolf |  | Golf Equipment |  | Apparel, Gear & Other |  | Total |  | Golf Equipment |  | Apparel, Gear & Other |  |  |  | Total
Major revenue categories: |  |  |  |  |  |  |  |  |  |  |
Venues | $ | 313,640 |  |  | $ | — |  |  | $ | — |  |  | $ | 313,640 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | — |
Other business lines | 20,143 |  |  | — |  |  | — |  |  | 20,143 |  |  | — |  |  | — |  |  |  |  | — |
Golf clubs | — |  |  | 229,346 |  |  | — |  |  | 229,346 |  |  | 209,356 |  |  | — |  |  |  |  | 209,356 |
Golf balls | — |  |  | 60,269 |  |  | — |  |  | 60,269 |  |  | 57,921 |  |  | — |  |  |  |  | 57,921 |
Apparel | — |  |  | — |  |  | 150,240 |  |  | 150,240 |  |  | — |  |  | 125,609 |  |  |  |  | 125,609 |
Gear, accessories & other | — |  |  | — |  |  | 82,823 |  |  | 82,823 |  |  | — |  |  | 82,673 |  |  |  |  | 82,673 |
| $ | 333,783 |  |  | $ | 289,615 |  |  | $ | 233,063 |  |  | $ | 856,461 |  |  | $ | 267,277 |  |  | $ | 208,282 |  |  |  |  | $ | 475,559 |
|  |  | Operating and Reportable Segments
Nine Months Ended September 30, 2021 |  | Nine Months Ended September 30, 2020
| Topgolf |  | Golf Equipment |  | Apparel, Gear & Other |  | Total |  | Golf Equipment |  | Apparel, Gear & Other |  |  |  | Total
Major product category: |  |  |  |  |  |  |  |  |  |  |
Venues | $ | 702,234 |  |  | $ | — |  |  | $ | — |  |  | $ | 702,234 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | — |
Other business lines | 49,639 |  |  | — |  |  | — |  |  | 49,639 |  |  | — |  |  | — |  |  |  |  | — |
Golf clubs | — |  |  | 865,671 |  |  | — |  |  | 865,671 |  |  | 616,620 |  |  | — |  |  |  |  | 616,620 |
Golf balls | — |  |  | 202,085 |  |  | — |  |  | 202,085 |  |  | 152,261 |  |  | — |  |  |  |  | 152,261 |
Apparel | — |  |  | — |  |  | 336,942 |  |  | 336,942 |  |  | — |  |  | 239,201 |  |  |  |  | 239,201 |
Gear, accessories & other | — |  |  | — |  |  | 265,152 |  |  | 265,152 |  |  | — |  |  | 206,749 |  |  |  |  | 206,749 |
| $ | 751,873 |  |  | $ | 1,067,756 |  |  | $ | 602,094 |  |  | $ | 2,421,723 |  |  | $ | 768,881 |  |  | $ | 445,950 |  |  |  |  | $ | 1,214,831 |
The Topgolf operating segment contributed $4,387,000 and $8,582,000 in product sales for the three and nine months ended September 30, 2021, respectively, that are included within the consolidated condensed statements of operations, which include sales of golf clubs, golf balls, apparel sales, and equipment sales. The Apparel, Gear and Other and Topgolf operating segments include royalty income from licensing agreements of $17,009,000 and $50,117,000, respectively, for the three and nine months ended September 30, 2021. For the three and nine months ended September 30, 2020, the Company recognized royalty income of $5,849,000 and $14,946,000, respectively. As of December 31, 2020, the Company's balance for deferred revenue was $2,546,000, which included deferred revenue from gift cards. In connection with the merger with Topgolf completed on March 8, 2021, the Company acquired deferred revenue related to event deposits, lifetime and premium memberships, prepaid sponsorships, virtual currency and game credits related to the WGT digital golf game, and gift cards. As of September 30, 2021, the Company’s deferred revenue balance was $84,359,000. The Company recognized revenues of $106,283,000 and $231,561,000 related to the redemption and amortization of deferred revenue, including breakage on unredeemed gift cards, during the three and nine months ended September 30, 2021, respectively. The Company recognized revenues of $795,000 and $1,825,000 related to the redemption and breakage of unredeemed gift cards during the three and nine months ended September 30, 2020, respectively. The following table summarizes revenue by geographical areas in which the Company operates (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Revenue by Major Geographic Region: |  |  |  |  |  |  |
United States | $ | 552,895 |  |  | $ | 214,619 |  |  | $ | 1,583,874 |  |  | $ | 603,836 |
Europe | 157,215 |  |  | 134,680 |  |  | 386,559 |  |  | 281,473 |
Japan | 63,441 |  |  | 56,530 |  |  | 197,188 |  |  | 158,517 |
Rest of world | 82,910 |  |  | 69,730 |  |  | 254,102 |  |  | 171,005 |
| $ | 856,461 |  |  | $ | 475,559 |  |  | $ | 2,421,723 |  |  | $ | 1,214,831 |
The Company sells its golf equipment products and apparel, gear and accessories in the United States and internationally, with its principal international regions being Japan and Europe. On a regional basis, sales of golf equipment are generally higher than sales of apparel gear and other in most regions other than Europe, which has a higher concentration of apparel, gear and other sales as a result of Jack Wolfskin, which is headquartered in Germany. Venues revenue is higher in the United States, as Topgolf has more domestic venues than international. Other business lines revenue is predominantly in the United States and Europe. The Company records an estimate for anticipated returns as a reduction of product revenues and cost of products, and accounts receivable, in the period that the related sales are recorded. Sales returns are estimated based upon historical returns, current economic trends, changes in customer demands and sell-through of products. The Company also offers certain customers sales programs that allow for specific returns. The Company records a sales return liability as an offset to accounts receivable for anticipated returns related to these sales programs at the time of sale based on the terms of the sales program. The cost recovery of inventory associated with this reserve is accounted for in other current assets. The Company's balance for cost recovery was $36,652,000 and $23,441,000 as of September 30, 2021 and December 31, 2020, respectively. The Company's provision for the sales return liability will fluctuate with the seasonality of the business, while actual sales returns are generally more heavily weighted toward the back half of the year as the golf season comes to an end. Historically, the Company’s actual sales returns have not been materially different from management’s original estimates. The following table provides a reconciliation of the activity related to the Company’s sales return liability (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2021 |  | 2020 |  | 2021 |  | 2020
Beginning balance | $ | 71,592 |  |  | $ | 56,837 |  |  | $ | 43,986 |  |  | $ | 34,314 |
Provision | 14,381 |  |  | 20,578 |  |  | 79,271 |  |  | 82,588 |
Sales returns | (14,558) |  |  | (17,099) |  |  | (51,842) |  |  | (56,586) |
Ending balance | $ | 71,415 |  |  | $ | 60,316 |  |  | $ | 71,415 |  |  | $ | 60,316 |

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b)(2) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 + Details
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