Toptracer: Callaway's Recurring Revenue Machine
Toptracer innovation has changed the driving range and how we watch golf.
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Hey Golfers —
Toptracer was developed to solve a problem — not being able to see the golf ball on television. And while that piece of its business is still significant today — Toptracer has evolved its product offering to become one of the unique businesses in golf.
Before we dive in — here is a little history.
In 1998, Daniel Forsgren was frustrated he couldn’t see the golf ball while watching golf on television — so he set out to change that. Toptracer can detect a golf ball’s flight using sophisticated cameras and sensors. Toptracer officially launched eight years later, in 2006, under the name Protracer in Sweden.
The PGA Tour, European Tour, and media partners jumped at the opportunity to provide a better viewing experience. Watching golf on TV changed forever.
Viewers now saw several data points.
Apex
Flight
Speed
Distance
To grow the Protracer product — Daniel and his team expanded the technology to driving ranges in 2012. The strategy to expand to driving ranges made perfect sense from a product market fit and growth opportunity. The United States has an estimated 68,000 driving ranges and family fun centers.
And in 2016, Topgolf acquired Protracer and re-branded the company to Toptracer. The acquisition was loaded with synergies that enabled both companies’ wild growth.
Callaway fully acquired Topgolf in 2021 and now has Toptracer rolled up in the Callaway brand — which in my opinion, has created golf’s greatest flywheel. But that is a newsletter topic for another day.
If business leaders needed to pick their most desired revenue model — recurring revenue would be on the top of many people’s lists. Recurring revenue is the north star in the business world. Instead of having a one-time sale — that is somewhat unpredictable — a business gets predictable, stable, and typically high-margin revenue.
Toptracer is a recurring revenue machine.
Toptracer is installed in every Topgolf facility. But even better — it is installed in some competitor facilities. Take Suite Shots in Fargo, North Dakota — a Topgolf-like facility with 60 climate-controlled bays powered by Toptracer technology. That is what building a business moat looks like.
But that isn’t even scratching the surface. Toptracer is installed in several golf verticals.
Resorts
Private Golf Clubs
Stand-Alone Driving Ranges
Callaway held its investor day this past April. They detailed some of the economics behind Toptracer. They have grown 60% in annual bay installs since 2019. But that isn’t even the craziest stat — Toptracer only has 3% of the total addressable market. Huge opportunity for growth.
Toptracer has installed over 15,000 bays since inception and will install 8,000 bays in 2022.
Callaway doesn’t break out Toptracer financials and metrics, but some pricing information is available that we can use for an estimate.
Toptracer does not charge a fee for the installation. They charge about $200 per month per bay. With 15,000 bays installed — we can estimate monthly recurring revenue to be around $3,000,000.
If Toptracer grows 10x to meet 30% of the total addressable market — that would result in around $30,000,000 monthly recurring revenue, or about $360,000,000 per year — predictable, forecasted revenue. For reference — Callaway did about $1.2 billion in equipment revenue in 2021.
A common question within the recurring revenue space is, “what about churn?” Most customers sign a five-year lease with Toptracer. So that revenue is pretty locked in.
Toptracer does work with customers on seasonality — so monthly recurring revenue likely fluctuates based on the time of year.
Golf equipment manufacturers rely on annual product releases as quasi-recurring revenue, which can cause new-product fatigue in the market. While the big OEMs are very good at forecasting revenue — new product releases don’t grant you the same advantages as recurring revenue. Callaway diversifying its revenue away from equipment is incredibly intriguing. So far — it’s paying off.
And Toptracer is typically a win-win — for the company and their customer.
One piece of golf entertainment is driving food & beverage revenue. Industry estimates have food & beverage revenue at around 50% of total revenue in the golf entertainment space. Toptracer is enabling driving ranges worldwide to increase food & beverage revenue.
Bay View Golf Course in Kaneohe, Hawaii, recently installed Toptracer technology in their 38-bay driving range — costing them around $7,600 per month. Before they installed Toptracer — they did about $38,000 in monthly revenue. They increased monthly revenue by 22% since installing Toptracer in their bays. And this is just one of many examples of driving range owners and operators utilizing Toptracer to increase revenue.
Have yourself a great Monday. Talk to you next week!
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Hey Jared- great post! Curious more so on how you're estimating the total market here? I'm thinking about it in terms of # of driving ranges and # of bays / range. My estimates suggest ~1k ranges (times) 35 bays / range = 35,000 bays in total. This would imply ~40% share of the market thus far.
Just trying to better square the math between your 3% and my 40%. A total beginner to the industry so might be completely off base here. Let me know what you think.
Jared - Thanks for the post. Interesting to learn more about the Toptracer business model. I am curious about your Bay View Golf Course example. A 22% increase on $38k of monthly revenue is $8,360/month in additional revenue. When you subtract the $7,600 monthly cost they're only netting an additional $760 per month which means a 10% ROI. Not bad, but nothing to write home about either. I'm by no means a driving range operator so perhaps there are limited options to invest and increase revenue, but it didn't seem to be that impressive of a return to me. Thoughts?