Topgolf Callaway's Q3 2025: Contradictions Emerge on Tariff Impact, Pricing Power, and Topgolf Traffic Trends

Date of Call: None provided

Financials Results

• Revenue: $934M, up 3% YOY (Q3 2025 consolidated)
• Operating Margin: Topgolf venue EBITDA margin just over 33%, ~flat YOY; consolidated adjusted EBITDA $115M, down $4M YOY

Guidance:

• Full-year 2025 revenue raised to $3.90B–$3.94B (midpoint +$60M).
• Full-year adjusted EBITDA raised to $490M–$510M (midpoint +$40M).
• Topgolf FY revenue raised to $1.77B–$1.79B and adjusted EBITDA to $295M–$305M; same-venue sales now expected down mid-single digits.
• Tariffs estimated at ~$40M impact for full-year 2025; if rates hold, impact could be a little more than double next year.
• Topgolf net CapEx ~ $120M; core business CapEx ~ $40M.
• Q4 consolidated revenue guide $763M–$803M; Q4 adjusted EBITDA $13M–$33M.

Business Commentary:

* Strong Golf Equipment Performance: - Callaway's golf equipment revenue increased by 4% year-over-year to $305 million in Q3, with golf clubs and balls recording respective increases of 4% and 6%. - This growth was driven by market conditions, solid execution, and strong brand performance, despite lower new product launch volume.

• Topgolf Traffic Growth and Revenue Boost:
• Topgolf experienced a 1% increase in same-venue sales and a 4% revenue increase to $472 million, with a significant traffic uptick of high teens.

• The improvement was attributed to successful value initiatives, consumer appeal, and strategic repositioning.

• Positive Market Dynamics and Consumer Engagement:

• The U.S. golf market is up 2% year-to-date, with Q3 sales stronger than year-to-date data on both manufacturer shipment and Datatech sell-through reports.

• Continued consumer interest, strong participation, and excellent market conditions are driving these positive trends.

• Impact of Tariffs and Cost Management:

• Topgolf Callaway Brands faced an incremental $12 million tariff expense in the quarter, with an estimated full-year impact of $40 million.
• The company is mitigating this impact through efficiency improvements, pricing, and vendor negotiations, including a reduction in force of 300 positions.

Sentiment Analysis:

Overall Tone: Positive

• Management: "Q3 results exceeded expectations" and raised full-year revenue and adjusted EBITDA guidance. Consolidated revenue was $934M, up 3% YOY. Topgolf transitioned to positive same-venue sales in Q3 and traffic was up mid‑high teens; company described increased confidence in strategic direction and value-creation prospects.

Q&A:

• Question from Eric Wold (Texas Capital Securities): Given strong demand, how much pricing power do you have on clubs and balls into 2026 to offset tariff pressure? Are competitors raising prices and is that a path you can take?
  Response: Pricing will be part of mitigating tariffs but is dependent on product differentiation; selective price increases likely on new, demonstrably superior products rather than broad increases.

• Question from Eric Wold (Texas Capital Securities): Trends in time-at-bay booking (shorter periods) and food & beverage attach as value initiatives played out over the summer?
  Response: Value initiatives drove traffic up mid‑high teens; shorter bay windows helped modestly; F&B same-venue sales are up driven by traffic and new menu/platters, alcohol attach unchanged.

• Question from Simeon Gutman (Morgan Stanley): Can you talk about sell-through this quarter (vs sell-in) and any signals for consumer behavior ahead of 2026 launches? Also, what's driving the wider Q4 profit range—tariffs or Topgolf variability?
  Response: Sell-through was strong and exceeded sell-in (retail destocking), signaling healthy consumer demand; management won't give 2026 estimates now. The Q4 range is normal seasonality for a diverse business; tariffs are increasingly understood and not the primary source of unusual uncertainty.

• Question from Matthew Boss (JPMorgan): What are you seeing from new entrants to golf and market share opportunities into next year, especially with the new Chrome launch?
  Response: Participation trends and leading indicators (Topgolf visits) are positive; management is optimistic on brand and product, especially a premium ball launch next year, but will not provide 2026 market-share estimates now.

• Question from Matthew Boss (JPMorgan): Can you break apart the ~700 bps sequential improvement in Topgolf same-venue sales and update on October trends and strategic alternatives timing?
  Response: Traffic acceleration from value initiatives drove the improvement—1–2 bay turned positive, 3+ bay declines moderated; October trends consistent with Q3; no timing update on separation process but improved results enhance value-creation prospects.

• Question from Unknown (UBS): How should we think about the puts and takes for Topgolf same-venue growth into next year—pricing vs mix vs volume?
  Response: Management will continue value initiatives, roll out Toast and pay-and-bay/mobile ordering, launch frequency/subscription programs (Play More), optimize marketing and introduce new experiences—focus is on driving frequency and spend rather than raising price today.

• Question from Unknown (UBS): How many Topgolf unit openings are planned into next year?
  Response: Planning three new Topgolf venues for next year.

• Question from Anna Glaessgen (B. Riley Securities): On the Topgolf comp inflection, what's the mix of new vs lapsed visitors and any change in revisit behavior versus prior cohorts?
  Response: Traffic uplift comprised roughly two‑thirds repeat visitors and one‑third new; no material change in demographics and too early to see sustained frequency gains given current annual frequency ~1.5.

• Question from Anna Glaessgen (B. Riley Securities): Visibility into corporate/holiday event bookings for Q4—how much is already booked versus still to come?
  Response: Reasonable visibility: just over half of bookings are made ~30 days out, with a meaningful portion still to be booked through November and early December; this is incorporated into guidance.

• Question from Noah Zatzkin (KeyBanc Capital Markets): Was the Q3 improvement in corporate business just comps or structural changes?
  Response: Improvement driven by sales/marketing changes and product repositioning, plus market comps/leveling—management believes actions were impactful and market is stabilizing.

• Question from Noah Zatzkin (KeyBanc Capital Markets): Any updated thoughts heading into the holiday season for TravisMathew?
  Response: TravisMathew outperformed the challenged athleisure market, gained share last quarter, and management is optimistic for Q4 with those trends baked into guidance.

• Question from Martin Mitela (Raymond James): How much runway will a new Topgolf CEO need before separation can be enacted?
  Response: No timing provided; management stressed strong candidate interest and that the interim team is performing well but declined to specify a timeline.

• Question from George Kelly (Unknown Firm): You provided ~$40M of tariff impact for this year—what should we expect for next year?
  Response: If current tariff rates hold, next year's impact would be a little more than double this year's ~$40M estimate.

Contradiction Point 1

Tariff Impact and Financial Guidance

It involves changes in financial forecasts, specifically regarding the impact of tariffs on the company's financial performance, which are critical indicators for investors.

What can you share about tariff expectations for next year? - George Kelly (Raymond James)

20251107-2025 Q3: We continue to see significant inflationary pressures related to tariffs. If existing rates hold, the impact would be more than double this year's. - Oliver Brewer(CEO)

Have there been any changes to tariff calculations recently, particularly due to new countries involved? - Simeon Ari Gutman (Morgan Stanley)

2025Q2: Tariffs remain fluid and changing frequently. Our current estimate for this year's tariff impact is about $40 million, up from $25 million. This is embedded in our guidance, net of mitigation efforts. - Oliver Brewer(CEO)

Contradiction Point 2

Topgolf Traffic and Value Initiatives

It involves differing perspectives on the effectiveness of value initiatives and their impact on Topgolf's traffic and sales performance, which are key metrics for understanding the company's strategies and market positioning.

What are the trends in dwell time and food and beverage attach rates at Topgolf? - Eric Wold (Texas Capital Securities)

20251107-2025 Q3: Value initiatives led to mid-high teens traffic increase. - Oliver Brewer(CEO)

Has the pricing and value proposition been correctly aligned following the traffic improvement at Topgolf in Q2 and July? What is required to achieve positive comps again? - Matthew Robert Boss (JPMorgan)

2025Q2: We're encouraged by the immediate change in trends, with significant momentum month-to-month. The current mix of initiatives is profitable and maintaining stable margins. - Arthur Francis Starrs(CEO, Topgolf)

Contradiction Point 3

Topgolf Corporate Events and Booking Trends

It involves differing assessments of the corporate events segment, which is an important revenue driver for Topgolf, and its booking trends, which are crucial for planning and forecasting.

What is your visibility into Q4 corporate event business, particularly for holiday events? - Anna Glaessgen (B. Riley Securities)

20251107-2025 Q3: We have a reasonable level of visibility with over half of events booked 30 days out. Significant bookings will continue into December. - Oliver Brewer(CEO)

Is Topgolf's pricing and value proposition now correctly aligned? What steps are needed to achieve positive comps? - Matthew Robert Boss (JPMorgan)

2025Q2: We're encouraged by the immediate change in trends, with significant momentum month-to-month. The current mix of initiatives is profitable and maintaining stable margins. - Arthur Francis Starrs(CEO, Topgolf)

Contradiction Point 4

Pricing Power and Tariff Impact

It involves the company's ability to utilize pricing power to offset tariff pressures and the strategic approach to pricing adjustments, which are crucial for revenue management and investor expectations.

What pricing power does the company have on golf equipment and balls to offset tariff pressure, and do you plan to raise prices? - Eric Wold (Texas Capital Securities)

20251107-2025 Q3: The golf equipment category is less price elastic with healthy market conditions. Pricing power is dependent on differentiated product quality. Given the tariff situation, we will consider pricing adjustments for new products. However, we must be strategic and consider the consumer response. - Oliver Brewer(CEO)

Has there been a change in the industry environment for the Golf Equipment segment? How is consumer behavior being affected by tariffs? - Matthew Boss (JPMorgan)

2025Q1: The golf consumer remains strong, and the markets are solid. There's no material change, so the outlook remains positive. Golf business has been on a good run and remains so. - Chip Brewer(CEO)

Contradiction Point 5

Topgolf's Consumer Behavior and Revenue Trends

It highlights changes in the company's understanding and reporting of Topgolf's consumer behavior and revenue trends, which are essential for strategic planning and investor expectations.

Can you discuss trends in on-site time and F&B attach rates at Topgolf? - Eric Wold (Texas Capital Securities)

20251107-2025 Q3: Value initiatives led to mid-high teens traffic increase. Offering varied booking times was well-received. Food and beverage sales are up, driven by traffic and new offerings. - Oliver Brewer(CEO)

What portion of the softening at Topgolf is due to macro factors versus competition? When do you plan to scale value initiatives? - Michael Swartz (Truist Securities)

2025Q1: Most direct impact on events is from corporate spending pressure, but the brand remains competitive. The consumer is price sensitive. The immediate response is positive. Initiatives like Sunday Funday and Topgolf Nights are rolling out quickly. We're moving faster than previously indicated. - Artie Starrs(CEO)