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Revenue Recognition | 6 Months Ended
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Jun. 30, 2022
Revenue from Contract with Customer [Abstract] |
Revenue Recognition | Revenue Recognition The Company primarily recognizes revenue from the sale of its products and operation of its venues. Revenue from product sales includes 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 revenue also includes 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, the sale of game credits to guests, franchise fees, the sale of gift cards, sponsorship contracts, leasing revenue and non-refundable deposits received for venue reservations at Topgolf. In addition, the Company recognizes service revenue through its online multiplayer World Golf Tour (“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.
| Operating and Reportable Segments
Three Months Ended June 30, 2022 |  | Three Months Ended June 30, 2021
| Topgolf (1) |  | Golf Equipment |  | Active Lifestyle |  | Total |  | Topgolf (1) |  | Golf Equipment |  | Active Lifestyle |  | Total
Venues | $ | 383.4 |  |  | $ | — |  |  | $ | — |  |  | $ | 383.4 |  |  | $ | 307.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 307.1 |
Other business lines | 20.3 |  |  | — |  |  | — |  |  | 20.3 |  |  | 18.3 |  |  | — |  |  | — |  |  | 18.3 |
Golf club | — |  |  | 367.8 |  |  | — |  |  | 367.8 |  |  | — |  |  | 320.0 |  |  | — |  |  | 320.0 |
Golf ball | — |  |  | 84.1 |  |  | — |  |  | 84.1 |  |  | — |  |  | 81.3 |  |  | — |  |  | 81.3 |
Apparel | — |  |  | — |  |  | 136.9 |  |  | 136.9 |  |  | — |  |  | — |  |  | 91.4 |  |  | 91.4 |
Gear, accessories & other | — |  |  | — |  |  | 123.2 |  |  | 123.2 |  |  | — |  |  | — |  |  | 95.5 |  |  | 95.5 |
| $ | 403.7 |  |  | $ | 451.9 |  |  | $ | 260.1 |  |  | $ | 1,115.7 |  |  | $ | 325.4 |  |  | $ | 401.3 |  |  | $ | 186.9 |  |  | $ | 913.6 |
(1) As of January 1, 2022, in order to align with the Company’s current management reporting structure, the Company reports revenues associated with corporate advertising sponsorship contracts in the Venues service category. Revenues associated with corporate advertising sponsorship contracts were previously included in Other business lines at the Topgolf segment. Accordingly, revenue of $3.7 million for the three months ended June 30, 2021 was reclassified from Other business lines to Venues to conform with current year presentation.
| Operating and Reportable Segments
Six Months Ended June 30, 2022 |  | Six Months Ended June 30, 2021
| Topgolf (1) |  | Golf Equipment |  | Active Lifestyle |  | Total |  | Topgolf (1) |  | Golf Equipment |  | Active Lifestyle |  |  |  | Total
Venues | $ | 689.9 |  |  | $ | — |  |  | $ | — |  |  | $ | 689.9 |  |  | $ | 393.2 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 393.2 |
Other business lines | 35.8 |  |  | — |  |  | — |  |  | 35.8 |  |  | 24.9 |  |  | — |  |  | — |  |  |  |  | 24.9 |
Golf club | — |  |  | 738.2 |  |  | — |  |  | 738.2 |  |  | — |  |  | 636.3 |  |  | — |  |  |  |  | 636.3 |
Golf ball | — |  |  | 181.7 |  |  | — |  |  | 181.7 |  |  | — |  |  | 141.8 |  |  | — |  |  |  |  | 141.8 |
Apparel | — |  |  | — |  |  | 275.3 |  |  | 275.3 |  |  | — |  |  | — |  |  | 186.7 |  |  |  |  | 186.7 |
Gear, accessories & other | — |  |  | — |  |  | 235.0 |  |  | 235.0 |  |  | — |  |  | — |  |  | 182.3 |  |  |  |  | 182.3 |
| $ | 725.7 |  |  | $ | 919.9 |  |  | $ | 510.3 |  |  | $ | 2,155.9 |  |  | $ | 418.1 |  |  | $ | 778.1 |  |  | $ | 369.0 |  |  |  |  | $ | 1,565.2 |
(1) As of January 1, 2022, in order to align with the Company’s current management reporting structure, the Company reports revenues associated with corporate advertising sponsorship contracts in the Venues service category. Revenue associated with corporate advertising sponsorship contracts were previously included in Other business lines at the Topgolf segment. Accordingly, revenue of $4.7 million for the six months ended June 30, 2022 was reclassified from Other business lines to Venues to conform with current year presentation.
The Company sells its Golf Equipment products and Active Lifestyle products in the United States and internationally, with its principal international regions being Europe and Asia. Golf Equipment product sales are generally higher than Active Lifestyle sales in most regions other than in Europe, which has a higher concentration of Active Lifestyle sales due to the Jack Wolfskin business. Venues revenue is higher in the United States due to Topgolf having significantly more domestic venues than international venues. Revenue related to other business lines at Topgolf is predominantly in the United States and regions within Europe. The following table summarizes revenue by geographical regions in which the Company operates (in millions):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Revenue by Major Geographic Region(1): |  |  |  |  |  |  |
United States | $ | 800.5 |  |  | $ | 642.8 |  |  | $ | 1,509.9 |  |  | $ | 1,031.0 |
Europe | 141.0 |  |  | 121.0 |  |  | 275.8 |  |  | 229.3 |
Asia | 135.2 |  |  | 115.1 |  |  | 293.9 |  |  | 239.1 |
Rest of world | 39.0 |  |  | 34.7 |  |  | 76.3 |  |  | 65.8 |
| $ | 1,115.7 |  |  | $ | 913.6 |  |  | $ | 2,155.9 |  |  | $ | 1,565.2 |
(1) As of January 1, 2022, the Company modified the composition of its regions. Japan, Korea, China, South-East Asia and India are now included in the Asia region. These regions, except for Japan, were previously reported in rest of world. As a result of this change, net revenues by region for the period presented in the prior year were recast to conform to the current year presentation.
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 Topgolf and Active Lifestyle operating segments and is primarily related to leasing agreements for Toptracer installations and licensing agreements, respectively. The following table summarizes royalty income by operating segment (in millions):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Royalty Income: |  |  |  |  |  |  |
Topgolf | $ | 14.5 |  |  | $ | 12.2 |  |  | $ | 24.2 |  |  | $ | 16.2 |
Active Lifestyle | 8.6 |  |  | 10.0 |  |  | 14.0 |  |  | 16.9 |
Total | $ | 23.1 |  |  | $ | 22.2 |  |  | $ | 38.2 |  |  | $ | 33.1 |
Deferred Revenue The Company’s short-term deferred revenue ba lance includes revenue from the sale of gift cards, event deposits, loyalty points, memberships and prepaid sponsorships at Topgolf, as well as virtual currency and game credits related to the WGT digital golf game. Revenue from gift cards is deferred and recognized when the cards are redeemed, which generally occurs within a twelve month period from the date of purchase. Revenue from the event deposits, loyalty points, memberships, prepaid sponsorships, game credits, and virtual currency related to the WGT digital golf game are recognized when redeemed or once the event or sponsorship occurs, over the estimated life of a customer’s membership, or based on historical currency or credit usage trends, as applicable, which generally occur within a one to thirty-six month period from the date of purchase. The following table provides a reconciliation of activity related to the Company’s short-term deferred revenue balance for the periods presented (in millions):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Beginning Balance | $ | 99.3 |  |  | $ | 70.9 |  |  | $ | 93.9 |  |  | $ | 2.5 |
Deferral of revenue | 163.1 |  |  | 110.2 |  |  | 270.5 |  |  | 184.4 |
Revenue recognized | (166.5) |  |  | (95.2) |  |  | (267.8) |  |  | (100.9) |
Breakage | (3.8) |  |  | (2.3) |  |  | (8.7) |  |  | (2.4) |
Foreign currency translation and other | (0.3) |  |  | — |  |  | 3.9 |  |  | — |
Ending Balance | $ | 91.8 |  |  | $ | 83.6 |  |  | $ | 91.8 |  |  | $ | 83.6 |
The Company’s long-term deferred revenue balance includes revenue associated with upfront territory fees and upfront franchise fees received from international franchise partners. Territory fees and franchise fees for each arrangement are allocated to each individual venue and recognized over a 40-year term, including renewal options, per the respective franchise agreement. As of June 30, 2022 and December 31, 2021, the Company’s long-term deferred revenue balance was $3.2 million and $3.4 million, respectively. For the three and six months ended June 30, 2022, the Company recognized $0.2 million and $0.3 million of deferred revenue related to the territory and franchise fees in income, respectively. 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 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 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 three or six months ended June 30, 2022. Historically, the Company’s actual amount of variable consideration related to these sales programs has not been materially different from its estimates. The following table provides a reconciliation of the activity related to the Company’s short-term sales program incentives for the periods presented (in millions):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Beginning Balance | $ | 32.3 |  |  | $ | 33.4 |  |  | $ | 23.3 |  |  | $ | 26.2 |
Additions | 11.7 |  |  | 4.3 |  |  | 27.6 |  |  | 18.9 |
Credits issued | (7.1) |  |  | (11.9) |  |  | (13.3) |  |  | (18.3) |
Other/foreign currency translation | (1.7) |  |  | — |  |  | (2.4) |  |  | (1.0) |
Ending Balance | $ | 35.2 |  |  | $ | 25.8 |  |  | $ | 35.2 |  |  | $ | 25.8 |
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 Company’s provision for the sales return liability fluctuates with the seasonality of the business, while actual sales returns are generally more heavily weighted toward the second half of the year as golf season comes to an end. Historically, the Company’s actual sales returns have not been materially different from management’s original estimates. The cost recovery of inventory associated with the sales return liability is accounted for in other current assets on the Company’s consolidated condensed balance sheet. As of June 30, 2022 and December 31, 2021, the Company's balance for cost recovery was $39.5 million and $25.9 million, respectively. The following table provides a reconciliation of the activity related to the Company’s sales return liability for the periods presented (in millions):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Beginning Balance | $ | 67.6 |  |  | $ | 60.8 |  |  | $ | 47.4 |  |  | $ | 44.0 |
Provision | 36.4 |  |  | 29.0 |  |  | 86.3 |  |  | 64.9 |
Sales returns | (26.4) |  |  | (18.2) |  |  | (56.1) |  |  | (37.3) |
Ending Balance | $ | 77.6 |  |  | $ | 71.6 |  |  | $ | 77.6 |  |  | $ | 71.6 |

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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 https://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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&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 https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 + Details
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