Topgolf Callaway Beats Earnings Expectations, Raises Guidance for Topgolf Segment

Topgolf Callaway beat Q2 revenue and earnings expectations, with declines in the Topgolf segment lessening due to pricing and strategy adjustments. The company still plans to spin off Topgolf, but the timeline may be pushed into next year after the CEO's resignation. Shares rallied 8.8% on the news.

Topgolf Callaway Brands (NASDAQ: MODG) reported its second-quarter 2025 earnings, surpassing market expectations with an earnings per share (EPS) of $0.24, significantly higher than the forecasted $0.02. The company also exceeded revenue projections, reporting $1.11 billion compared to the anticipated $1.09 billion. Despite this positive performance, the stock price fell by 2.22% to $8.79 in after-hours trading, reflecting mixed investor sentiment. However, shares rallied 8.8% on the news of the company's strong earnings and the announcement of a potential spin-off of Topgolf.

Key Takeaways
- EPS dramatically surpassed expectations with a surprise of 1100%.
- Revenue exceeded forecasts, reaching $1.11 billion.
- Stock price decreased by 2.22% in after-hours trading despite earnings beat.
- Full-year revenue guidance was raised, indicating confidence in future performance.

Company Performance
Topgolf Callaway Brands displayed resilience in Q2 2025, reporting consolidated revenues of $1.11 billion, a 4% decrease year-over-year. The golf equipment segment maintained steady revenue at $412 million, while the Topgolf segment experienced a 2% revenue decline. Despite these challenges, the company raised its full-year guidance, signaling optimism about future growth. Financial Highlights
- Revenue: $1.11 billion (4% decrease YoY)
- EPS: $0.24 (significantly above forecast)
- Adjusted EBITDA: $196 million (5% decrease YoY)
- Available liquidity: $1.16 billion
- Net debt reduced to $2.39 billion

Earnings vs. Forecast
Topgolf Callaway’s actual EPS of $0.24 greatly exceeded the forecast of $0.02, resulting in an EPS surprise of 1100%. The revenue also surpassed expectations, coming in at $1.11 billion against the forecasted $1.09 billion.

Market Reaction
Despite the earnings beat, Topgolf Callaway’s stock fell by 2.22% to $8.79 in after-hours trading. This movement contrasts with the company’s positive earnings surprise and could be attributed to investor concerns about the broader market or specific challenges within the Topgolf segment. The stock has shown strong momentum with a 16% return over the past six months, despite trading between its 52-week range of $5.42 to $14.51.

Outlook & Guidance
The company revised its full-year revenue guidance upward to a range of $3.8 billion to $3.92 billion. It also expects to be free cash flow positive in 2025 and continues to explore strategic options for the Topgolf separation. New product launches in H2 2025, including XForged irons and Opus SP wedges, are anticipated to drive growth.

Executive Commentary
Chip Brewer, CEO, emphasized the health of the golf equipment business, stating, "The golf equipment business has been very healthy throughout the year." Arti Stars, Topgolf CEO, highlighted operational successes, noting, "We are seeing continued momentum in the walk-in and reservations business."

Risks and Challenges
Tariff impacts have increased, now expected to cost $40 million. Competitive pressures in the golf equipment market could affect market share. The athleisure market’s decline may impact related product lines. Topgolf’s revenue decline and same-venue sales guidance of down 6-9% pose challenges. Macroeconomic factors could affect consumer spending and demand.

References:
[1] https://ca.investing.com/news/transcripts/earnings-call-transcript-topgolf-callaway-q2-2025-beats-expectations-stock-dips-93CH-4142027