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Revenue Recognition | 12 Months Ended
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Dec. 31, 2021
Revenue Recognition [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 $1,087,671,000 in net revenues for the year ended December 31, 2021 which includes approximately ten months of revenues since the completion of the merger. The following table presents the Company's revenue disaggregated by major category and operating and reportable segment (in thousands):
| Year Ended December 31, 2021
| Topgolf |  | Golf Equipment |  | Apparel, Gear & Other |  | Total
Venues | $ | 1,014,106 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,014,106 |
Other business lines | 73,565 |  |  | — |  |  | — |  |  | 73,565 |
Golf clubs | — |  |  | 994,479 |  |  | — |  |  | 994,479 |
Golf balls | — |  |  | 234,696 |  |  | — |  |  | 234,696 |
Apparel | — |  |  | — |  |  | 490,872 |  |  | 490,872 |
Gear, accessories & other | — |  |  | — |  |  | 325,729 |  |  | 325,729 |
| $ | 1,087,671 |  |  | $ | 1,229,175 |  |  | $ | 816,601 |  |  | $ | 3,133,447 |
|  |  | Year Ended December 31, 2020
|  |  | Golf Equipment |  | Apparel, Gear & Other |  | Total
Golf clubs |  |  | $ | 787,072 |  |  | $ | — |  |  | 787,072 |
Golf balls |  |  | 195,603 |  |  | — |  |  | 195,603 |
Apparel |  |  | — |  |  | 349,272 |  |  | 349,272 |
Gear, accessories & other |  |  | — |  |  | 257,513 |  |  | 257,513 |
|  |  | $ | 982,675 |  |  | $ | 606,785 |  |  | $ | 1,589,460 |
|  |  | Year Ended December 31, 2019
|  |  | Golf Equipment |  | Apparel, Gear & Other |  | Total
Golf clubs |  |  | $ | 768,310 |  |  | $ | — |  |  | $ | 768,310 |
Golf balls |  |  | 210,863 |  |  | — |  |  | 210,863 |
Apparel |  |  | — |  |  | 410,712 |  |  | 410,712 |
Gear, accessories & other |  |  | — |  |  | 311,178 |  |  | 311,178 |
|  |  | $ | 979,173 |  |  | $ | 721,890 |  |  | $ | 1,701,063 |
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 following table summarizes revenue by geographical areas in which the Company operates (in thousands):
| Years Ended December 31,
| 2021 |  | 2020 |  | 2019
Revenue by Major Geographic Region: |  |  |  |  |
United States | $ | 2,067,070 |  |  | $ | 778,600 |  |  | $ | 788,232 |
Europe | 499,533 |  |  | 372,957 |  |  | 428,628 |
Japan | 243,848 |  |  | 212,055 |  |  | 246,260 |
Rest of world | 322,996 |  |  | 225,848 |  |  | 237,943 |
| $ | 3,133,447 |  |  | $ | 1,589,460 |  |  | $ | 1,701,063 |
Product Sales The Company recognizes revenue from the sale of its products when it satisfies the terms of a performance obligation from a customer, and transfers control of the products ordered to the customer. Control transfers when products are shipped, and in certain cases, when products are received by customers. In addition, the Company recognizes revenue at the point of sale on transactions with consumers at its retail locations. Sales taxes, value added taxes and other taxes that are collected in connection with revenue transactions are withheld and remitted to the respective taxing authorities. As such, these taxes are excluded from revenue. The Company elected to account for shipping and handling as activities to fulfill the promise to transfer the good. Therefore, shipping and handling fees that are billed to customers are recognized in revenue and the associated shipping and handling costs are recognized in cost of goods sold as soon as control of the goods transfers to the customer. The Topgolf operating segment contributed $12,946,000 in product sales for the year ended December 31, 2021 which are included within the consolidated statements of operations, which include sales of golf clubs, golf balls, apparel and equipment. Royalty Income Royalty income is recognized over time in net revenues as underlying product sales occur, subject to certain minimum royalties, in accordance with the related licensing agreements. Royalty income is included in the Company's Apparel, Gear and Other and Topgolf operating segments. Total royalty income for the years ended December 31, 2021, 2020 and 2019 was $68,151,000, $21,838,000 and $22,455,000 respectively. The Apparel, Gear and Other operating segment includes royalty income from licensing agreements of $30,884,000, $21,838,000 and $22,445,000 for the years ended December 31, 2021, 2020, and 2019, respectively. The Topgolf operating segment includes royalty income from leasing agreements primarily related to Toptracer installations of $37,267,000 for the year ended December 31, 2021. Deferred Revenue The Company's deferred revenue balance has historically included revenues from the sale of gift cards. Revenues from gift cards are deferred and recognized when the cards are redeemed. In connection with the merger with Topgolf, completed on March 8, 2021, the Company acquired deferred revenue of $66,196,000 associated with event deposits, memberships, prepaid sponsorships, virtual currency and game credits related to the WGT digital golf game, and gift cards, which are recognized as revenue either over the estimated life of a customer’s membership, historical currency/credit usage trends, when redeemed or once the event or sponsorship occurs, as applicable. The Company's deferred revenue balance as of December 31, 2020 was $2,546,000, which primarily included deferred revenue from gift cards. During the year ended December 31, 2021, the Company recognized revenues of $370,472,000, which was primarily related to the redemption of event deposits and gift cards at Topgolf, which are typically recognized within a twelve month period of receipt. During the years ended December 31, 2020 and 2019 the Company recognized revenues of $2,840,000 and $3,031,000, respectively, which was primarily related to breakage and unredeemed gift cards. Within the amounts noted as recognized deferred revenue, the Company recognized $32,292,000, $2,840,000, and $3,031,000 of deferred gift card revenue during the years ended December 31, 2021, 2020, and 2019, respectively. Additionally, as of December 31, 2021 and 2020 the Company had $41,967,000 and $2,546,000, respectively, in accrued deferred revenue related to gift cards in accounts payable and accrued expenses on the accompanying consolidated balance sheets. As of December 31, 2021, the Company's balance for deferred revenue was $93,873,000. Variable Consideration The amount of revenue the Company recognizes is based on the amount of consideration it expects to receive from customers. The amount of consideration is the sales price adjusted for estimates of variable consideration, including sales returns, discounts and allowances as well as sales programs, sales promotions and price concessions that are offered by the Company as described below. These estimates are based on the amounts earned or expected to be claimed by customers on the related sales, and are therefore recorded as reductions to sales and trade accounts receivable. The Company’s primary sales program, the “Preferred Retailer Program,” offers potential rebates and discounts for participating retailers in exchange for providing certain benefits to the Company, including the maintenance of agreed upon inventory levels, prime product placement and retailer staff training. Under this program, qualifying retailers can earn either discounts or rebates based upon the amount of product purchased. Discounts are applied and recorded at the time of sale. For rebates, the Company estimates the amount of variable consideration related to the rebate at the time of sale based on the customer’s estimated qualifying current year product purchases. The estimate is based on the historical level of purchases, adjusted for any factors expected to affect the current year purchase levels. The estimated year-end rebate is adjusted quarterly based on actual purchase levels, as necessary. The Preferred Retailer Program is generally short-term in nature and the actual amount of rebate to be paid under this program is known as of the end of the year and paid to customers shortly after year-end. Historically, the Company's actual amount of variable consideration related to its Preferred Retailer Program has not been materially different from its estimates. The Company also offers short-term sales program incentives, which include sell-through promotions and price concessions or price reductions. Sell-through promotions are generally offered throughout the product's life cycle, which varies from two to three years, and price concessions or price reductions are generally offered at the end of the product's life cycle. The estimated variable consideration related to these programs is based on a rate that includes historical and forecasted data. The Company records a reduction to net revenues using this rate at the time of the sale. The Company monitors this rate against actual results and forecasted estimates, and adjusts the rate as deemed necessary in order to reflect the amount of consideration it expects to receive from its customers. There were no material changes to the rate related to the short-term sales program incentives during the year ended December 31, 2021. Historically, the Company's actual amount of variable consideration related to these sales programs has not been materially different from its estimates. 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 $25,947,000 and $24,112,000 as of December 31, 2021 and 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 reserve (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Beginning balance | $ | 43,986 |  |  | $ | 29,043 |  |  | $ | 24,522 |
Provision | 91,007 |  |  | 106,178 |  |  | 95,094 |
Sales returns | (87,634) |  |  | (91,235) |  |  | (90,573) |
Ending balance | $ | 47,359 |  |  | $ | 43,986 |  |  | $ | 29,043 |

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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=123351226&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=123351226&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=123351226&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=123351226&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=123351226&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=123351226&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=123351226&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=123351226&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=123351226&loc=SL49130554-203045 + Details
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