Topgolf Callaway Brands: Strategic Licensing & Turnaround Momentum Signal Undervalued Growth Opportunity

In the face of a challenging macroeconomic environment, Topgolf Callaway Brands (MODG) has demonstrated resilience and strategic agility, positioning itself as an undervalued growth opportunity for investors. Recent financial results, coupled with extended licensing agreements and a reinvigorated Topgolf segment, underscore the company's potential to deliver long-term value creation.

Financial Turnaround and Strategic Cost Management

Topgolf Callaway Brands reported third-quarter 2025 revenue of $934 million, a 7.8% decline year-over-year but exceeding analyst expectations of $913.2 million. Adjusted EBITDA surged to $114.4 million, reflecting a 12.2% margin and surpassing forecasts of $87.63 million. This outperformance was driven by cost discipline and operational improvements, including a workforce reduction of 300 positions to mitigate the impact of $40 million in annualized tariffs. The company raised its full-year 2025 EBITDA guidance to $490–$510 million, signaling confidence in its ability to navigate headwinds while maintaining profitability.

Strategic Licensing Agreements: A Foundation for Long-Term Growth

A critical pillar of MODG's value creation lies in its extended licensing partnerships. The most notable is the renewed agreement with Perry Ellis International for Callaway-branded apparel, now extended through December 31, 2032. This partnership, originally signed in 2009, includes plans for a premium Callaway Apparel line launching by 2028, ensuring sustained revenue streams in the lifestyle segment. According to a report by Bloomberg, the Callaway Apparel brand already enjoys global distribution across five continents, supported by a robust network of retail and e-commerce partners.

Additionally, MODG has expanded its footprint in emerging markets through a multiyear strategic agreement with Golf Saudi Entertainment, LLC. Under this deal, Golf Saudi will construct three Topgolf venues by 2028 and serve as the exclusive distributor for Callaway Golf, Odyssey, and Ogio products in the region. This partnership not only diversifies revenue sources but also aligns with Saudi Arabia's Vision 2030 initiatives to boost sports and entertainment infrastructure.

Topgolf's Revitalization: Driving Traffic and Market Share

The Topgolf segment, once a drag on performance, has shown signs of recovery. In Q3 2025, same-venue sales grew by 1%, the first positive inflection in several quarters. This turnaround was fueled by value-driven promotions such as "Sunday Funday" and "Half-Off Mon-Thurs," which drove a 17% year-over-year increase in visits. CEO Chip Brewer emphasized that these initiatives have improved Topgolf's value perception, with consumer surveys showing rising rankings in both affordability and brand appeal. As noted in a Bloomberg analysis, the segment's momentum has contributed to an upward revision of full-year 2025 revenue guidance to $3.90–$3.94 billion.

Looking ahead, the company plans to open three new Topgolf venues in 2026, further capitalizing on its revitalized positioning.

Spin-Off Strategy: Unlocking Synergies

A pivotal move in MODG's long-term strategy is the planned spin-off of Topgolf into a standalone entity by mid-2025. This separation aims to create two distinct, well-capitalized companies: one focused on golf equipment and active lifestyle (Callaway), and the other on venue-based entertainment (Topgolf). By isolating the Topgolf segment, the company can pursue tailored growth strategies, including expanded licensing deals and international expansion, without the constraints of its equipment division.

Investment Thesis: Undervalued Potential

Despite its progress, MODG remains undervalued relative to its peers. The company's extended licensing agreements, coupled with Topgolf's turnaround and strategic spin-off, position it to capitalize on both near-term profitability and long-term market share gains. While challenges such as tariffs persist, MODG's pricing power, operational efficiency, and diversified revenue streams mitigate downside risks.

Conclusion

Topgolf Callaway Brands is navigating a complex landscape with strategic precision. By leveraging long-term licensing partnerships, revitalizing its core Topgolf venues, and pursuing a spin-off to unlock value, MODG is well-positioned to deliver robust growth. For investors seeking exposure to a turnaround story with durable partnerships and scalable operations, MODG presents a compelling case.