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CARLSBAD, Calif., April 10, 2025 /PRNewswire/ -- Topgolf Callaway Brands Corp. (NYSE: MODG) ("Topgolf Callaway Brands" or the "Company") announced that it has entered into an agreement to sell its Jack Wolfskin business to ANTA Sports for a base price of $290 million in cash, subject to net working capital and other customary adjustments. The transaction is expected to close in the late second quarter or early third quarter of 2025 and is subject to customary closing conditions, including receipt of certain ...

Topgolf Callaway (NYSE: NYSE: MODG ) has long been a powerhouse in the golf industry, blending tradition with modern entertainment. Yet, despite its strong brand recognition, the stock has recently underperformed, leaving many investors questioning its potential.I hold a B.Sc and M.Sc in Mechanical Engineering from one of Germany’s top universities. With over five years of experience in strategy and management consulting at industry-leading firms, I have worked across various sectors, helping businesses nav ...

Seasonal Sales Fluctuations - The company's golf equipment sales are significantly affected by seasonal fluctuations, with first-quarter sales representing initial sell-in to retailers for the new golf season [163]. - Apparel sales are also subject to seasonal demand, particularly for cold-weather products, which may decline in unseasonably warm years [164]. - Topgolf venues historically see higher revenue in the second and third quarters, with first and fourth quarters typically experiencing lower revenue due to cooler temperatures [165]. Supply Chain and Manufacturing Risks - A significant portion of the company's products is manufactured internationally, exposing it to risks associated with global operations and foreign currency fluctuations [173][176]. - The company engages in hedging activities to mitigate the impact of foreign currency fluctuations, but these activities may not eliminate all risks [178]. - Rising costs and availability issues for raw materials and components could materially affect the company's financial condition and results of operations [180][181]. - The company is dependent on a limited number of suppliers for golf club components, which may pose risks to its supply chain [173]. - The company relies on a limited number of suppliers for golf equipment, and the loss of any supplier could disrupt production and harm the business [189]. Management and Governance - The concentration of ownership among certain stockholders could influence corporate governance and strategic decisions [170][171]. - The management team's effectiveness is critical to the company's success, and the loss of key executives could adversely impact strategic goals [169]. Legal and Regulatory Compliance - The company is subject to various licensing and regulatory requirements for its venues, and failure to maintain these licenses could adversely affect operations and financial condition [186]. - The company may face legal challenges from guests or employees, which could result in significant financial liabilities and negative publicity [196]. - Compliance with evolving data privacy laws, such as the California Consumer Privacy Act (CCPA), adds complexity and potential legal risks, requiring significant resources for compliance [235]. - The company is subject to extensive federal, state, and local regulations, with non-compliance potentially leading to fines, legal actions, and reputational damage [230]. - The company faces risks related to compliance with economic sanctions and anti-bribery laws, which could result in significant penalties and adversely affect its business [239]. Financial Performance and Risks - The company faces difficulties in accurately forecasting product demand, which could lead to insufficient or excess manufacturing, adversely affecting financial performance [184]. - A fire at the Launch Technologies golf ball manufacturing plant in Taiwan in September 2023 required the company to shift supply to other facilities, potentially impacting operations [190]. - Disruptions in delivery and shipping services could lead to manufacturing delays and increased costs, adversely affecting business operations [192]. - Instances of food-borne illness could harm the company's brand and revenues, particularly if they occur at franchisee locations [193]. - The profitability of the venues business line is affected by the availability and cost of food commodities, which may fluctuate due to various uncontrollable factors [200]. - Historical strategies to offset inflation included gradual menu price increases and improved purchasing practices, but future pricing flexibility may be limited [201]. - A long-term contract with a single broadline distributor covers a substantial majority of food and beverage supplies, posing risks if the distributor fails to deliver [202]. - The company does not engage in futures contracts for price fluctuations in food commodities, limiting protection against price changes [203]. - The company incurs additional expenses related to compliance with regulations on conflict minerals, which could affect the supply and pricing of materials used in manufacturing products [238]. - The company is subject to various environmental, health, and safety laws, which could lead to substantial civil or criminal fines and impact its financial condition [240]. - The company has significant U.S. net operating loss carryforwards (NOLs) and tax credit carryforwards, but their utilization may be limited due to ownership changes, particularly following the Topgolf merger [249]. - The company’s effective income tax rate may be adversely affected by changes in tax laws and the mix of earnings in different jurisdictions [246]. Growth and Expansion Challenges - In 2023, the company acquired assets related to Swing Suite golf simulation technology and BigShots Golf business, which may pose integration challenges [182]. - Growth initiatives require significant capital investments, with no assurance of positive returns, potentially affecting margins and cash flows [212]. - The construction and opening of new Topgolf venues may be hindered by the availability of financing, which historically has been secured through third-party developers, potentially affecting growth prospects [257]. - The company may need to raise additional funds to execute its growth strategy, including the expansion of its Topgolf business, prior to its planned separation [256]. - The company faces risks in securing timely financing on favorable terms, which could impact operations, product development investments, and repayment of existing debt [258]. Separation and Market Risks - The planned separation of the business into Callaway and Topgolf is expected to be completed in the second half of 2025, but the timeline and benefits are uncertain [263]. - The separation may lead to challenges such as management distraction, unforeseen costs, and potential negative market reactions [264]. - Post-separation, Callaway may face increased susceptibility to market fluctuations and reduced purchasing power compared to when it was combined with Topgolf [266]. - If the separation does not qualify as a tax-free reorganization, significant tax liabilities could be incurred by both the company and its shareholders [268]. - The anticipated benefits of the separation, such as improved access to capital markets and focused management strategies, may not be fully realized [273]. - The terms of agreements with Topgolf may not reflect those that would have been achieved in arm's-length negotiations with unaffiliated third parties, potentially leading to less favorable conditions [275]. Cybersecurity and Information Systems - Complex information systems are critical for operations, and failures or cybersecurity incidents could disrupt business and adversely affect financial performance [204]. - A cybersecurity incident in August 2023 affected personal information of approximately one million customers, highlighting vulnerabilities in information systems [206]. - The company is exposed to market and credit risk from transactions involving derivative financial instruments [373]. Interest Rates and Financial Obligations - Increases in interest rates could raise the cost of servicing debt, adversely affecting profitability and cash flows, and complicating future financing efforts [259]. - The company’s obligations under its credit facilities could limit its operational flexibility and ability to make dividend payments if financial covenants are not met [254]. - A hypothetical 10% increase in interest rates would result in an incremental interest expense of approximately $4.3 million for the 12-month period ending December 31, 2024 [378]. Brand and Reputation Risks - Physical safety risks at venues, including violence and civil unrest, could negatively impact sales and overall business performance [185]. - The company faces risks from product liability and recalls, which could lead to significant costs and impact reputation and sales [210]. - Increased scrutiny regarding the company's environmental, social, and governance (ESG) practices could lead to additional costs and risks, affecting its reputation and stakeholder relationships [242]. - The company faces risks associated with unauthorized sales through "gray markets," which can undermine authorized distribution channels and harm its reputation [224].

Financial Data and Key Metrics Changes - Q4 consolidated revenues reached $924 million, a 3% year-over-year increase, driven by growth in Golf Equipment and slight increases in Active Lifestyle, while Topgolf revenue remained flat [60][71] - Adjusted EBITDA for Q4 was $101 million, reflecting a 45% increase due to improved operating results across all segments [60][72] - Full year free cash flow was $203 million, exceeding expectations and strengthening the company's financial position [9][69] Business Line Data and Key Metrics Changes - Golf Equipment revenue increased by 13% to $225 million in Q4, attributed to successful product launches and strong sales [63] - Topgolf generated $439 million in revenue for Q4, with same venue sales down 8%, but offset by revenue from new venues [60][61] - Active Lifestyle segment saw a 1% increase in Q4 revenue, primarily driven by TravisMathew's apparel sales [64] Market Data and Key Metrics Changes - U.S. on-course golf participation rose by 1.5 million to 28.1 million, indicating growing interest in golf [43] - Rounds played in golf grew by 2% year-over-year, marking the fifth consecutive year of exceeding 500 million rounds [43] Company Strategy and Development Direction - The company is focused on separating Topgolf, evaluating options for a spin-off or sale, with all options still on the table [16][76] - Emphasis on improving same venue sales at Topgolf, with initiatives aimed at enhancing player experience and operational efficiency [41][42] - The Golf Equipment segment aims to grow revenues slightly faster than the overall golf market, with expectations for gross margin improvements [12][49] Management's Comments on Operating Environment and Future Outlook - Management acknowledged headwinds from foreign exchange and incentive compensation, projecting a $75 million negative impact on core business EBITDA [10][11] - Despite challenges, management remains optimistic about the future, expecting to navigate short-term headwinds and return to growth [56][76] Other Important Information - The company recorded a non-cash accounting charge of $1.45 billion related to the impairment of Topgolf goodwill and intangible assets, which does not affect liquidity [58][59] - The company anticipates 2025 revenue to decline by approximately 3% year-over-year at the midpoint of guidance, primarily due to foreign exchange impacts [70][71] Q&A Session Summary Question: Could you elaborate on same venue sales trends when the weather has been neutral at Topgolf? - Management indicated that neutral weather markets are currently running down low to mid-single digits, with expectations for improvement in 2025 due to easier comparisons and positive consumer response to value messaging [78][79] Question: Can you speak to the initial reception of the Elyte launch in clubs and the drivers of the 2025 organic forecast in this segment? - Management expressed pride in the Elyte product line and noted that while competition is strong, they are optimistic about performance as the year progresses [82][83] Question: Can you talk about the key drivers behind the acceleration in corporate events comp? - Management highlighted increased flexibility in event offerings and the ability to leverage learnings from various venues as key drivers for the acceleration in corporate events [89][90] Question: What drives the core business down year-over-year in 2025? - Management attributed the decline primarily to foreign exchange impacts, with additional challenges from competitive launches and reduced product launches in the second half of the year [94][96] Question: Can you provide an update on expectations for pro forma leverage of the core business? - Management stated that while specific guidance was not provided, they are confident in their cash flow position and plan to use retained stakes to help delever post-separation [120][121]

Core Insights - Topgolf Callaway Brands reported revenue of $924.4 million for the quarter ended December 2024, marking a year-over-year increase of 3% and exceeding the Zacks Consensus Estimate of $883.15 million by 4.67% [1] - The company experienced an EPS of -$0.33, which is a slight decline from -$0.30 a year ago, but it surpassed the consensus EPS estimate of -$0.40 by 17.50% [1] Revenue Performance by Category - Gear, Accessories & Other: $69.30 million, below the average estimate of $78.33 million, with a year-over-year decline of 9.8% [4] - Apparel: $191.30 million, exceeding the average estimate of $177.17 million, with a year-over-year increase of 5.2% [4] - Venues: $420 million, slightly above the average estimate of $401.59 million, with a year-over-year change of -0.5% [4] - Topgolf: $439 million, surpassing the average estimate of $419.97 million, with no change year-over-year [4] - Other business lines: $19 million, exceeding the average estimate of $18.37 million, with a year-over-year increase of 13.1% [4] - Golf Equipment: $224.80 million, above the average estimate of $207.17 million, with a year-over-year increase of 12.7% [4] - Active Lifestyle: $260.60 million, slightly above the average estimate of $255.50 million, with a year-over-year increase of 0.7% [4] - Golf Balls: $46 million, exceeding the average estimate of $45.17 million, with a year-over-year increase of 17.4% [4] - Golf Clubs: $178.80 million, above the average estimate of $162 million, with a year-over-year increase of 11.6% [4] - Services: $435.30 million, exceeding the average estimate of $418.11 million, with no change year-over-year [4] - Products: $489.10 million, above the average estimate of $461.58 million, with a year-over-year increase of 5.9% [4] Stock Performance - Over the past month, shares of Topgolf Callaway have returned -12.6%, compared to a -0.5% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Topgolf Callaway Brands outperformed expectations in Q4 2024, but faced challenges from a significant goodwill impairment charge. Topgolf Callaway Brands (MODG -4.42%), a leading company in the golf and active lifestyle industries, reported its Q4 2024 earnings on Feb. 24, 2025. The company's adjusted EPS exceeded expectations at -$0.33 compared to an anticipated -$0.40. Revenue of $924.4 million also surpassed the forecast of $884 million. Despite this outperformance, the quarter was marred by a substantia ...

Fourth Quarter and Full Year 2024 Earnings Conference Call February 24, 2025 Q4 2024 Highlights Topgolf's same venue sales, Adjusted EBITDA, Adjusted Free Cash Flow and venue margins all exceeded expectations in Q4. In 2024 the Callaway brand maintained its #1 position in U.S. market share in total golf clubs for the third consecutive year - and 9th time in the last 10 years - and achieved record U.S. market share in golf ball. IMPORTANT NOTICES Forward-looking Statements. During the presentation, any comme ...

Financial Performance - The Company reported a 3% increase in consolidated net revenue for Q4 2024, totaling $924.4 million, driven primarily by growth in the Golf Equipment segment [4]. - Adjusted EBITDA for Q4 2024 increased by 45.3% to $101.4 million, reflecting improved profitability in both the Topgolf and Golf Equipment segments [10]. - The Company experienced a GAAP net loss of $1,512.7 million for Q4 2024, largely due to a non-cash impairment charge of $1,452.0 million related to Topgolf's goodwill and intangible assets [2]. - Total operating cash flow increased by 5% to $382 million, while adjusted free cash flow rose by 27% to $203 million in Q4 2024 [3]. - For the full year 2024, net revenue decreased by 1.1% to $4,239.3 million, primarily due to declines in the Korea and Jack Wolfskin Europe businesses [11]. - Non-GAAP income from operations for Q4 2024 was $18.5 million, an increase of $27.2 million year-over-year, driven by improvements across all operating segments [8]. - Revenue remained flat at $439.0 million, with same venue sales declining by 8% [16]. - Total revenue for the year increased by $48.4 million to $1,809.4 million, despite a 9% decline in same venue sales [16]. - The company reported a net loss of $1,512.7 million for the twelve months ended December 31, 2024, compared to a net loss of $1,424.6 million in 2023, reflecting an increase of 6.2% [46]. - The company reported a total loss before income taxes of $1,473.2 million for the twelve months ended December 31, 2024, compared to a profit of $34.8 million in 2023 [44]. Segment Performance - The Golf Equipment segment reported a 12.7% increase in net revenue for Q4 2024, totaling $224.8 million [14]. - Topgolf's same venue sales, adjusted EBITDA, and venue margins all exceeded expectations in Q4 2024, indicating strong operational performance [3]. - Golf Clubs revenue grew by $18.6 million, or 11.6%, reaching $178.8 million, while Golf Balls revenue increased by $6.8 million, or 17.3%, totaling $46.0 million [43]. - Active Lifestyle segment revenue declined by $88.4 million, or 7.8%, totaling $1,047.9 million, while Topgolf revenue increased by $48.4 million, or 2.7%, reaching $1,809.4 million [44]. - Topgolf's segment operating income rose by $3.8 million, or 16.5%, to $26.9 million, contributing to a total segment operating income of $47.8 million, up 104.3% from the previous year [43]. Future Outlook - The company expects approximately $105 million in revenue headwinds and $120 million in Adjusted EBITDA headwinds for 2025 compared to 2024 [18]. - Consolidated net revenues for 2025 are estimated to be between $4.0 billion and $4.185 billion, down from $4.24 billion in 2024 [23]. - Topgolf same venue sales growth is expected to decline in the mid-single digits, compared to a 9% decline in 2024 [23]. Cash Flow and Liquidity - Available liquidity increased by $54.3 million to $796.9 million compared to December 31, 2023 [21]. - Cash flow from operating activities was $382.0 million, and Adjusted Free Cash Flow was $203.1 million [21]. - The company achieved a Consolidated Non-GAAP Adjusted Free Cash Flow of $203.1 million in 2024, an increase from $160.0 million in 2023 [49]. Impairments and Charges - Goodwill and intangible assets impairment for Q4 2024 was $1,452.0 million, significantly impacting the overall financial results [40]. - The company incurred $22.9 million in restructuring and reorganization charges during 2024, contributing to the overall financial losses [48]. - The total charges related to the impairment and abandonment of the Shankstars media game amounted to $12.7 million in 2024 [48]. - The company recognized non-cash goodwill and intangible assets impairment of $1,460.8 million in Q4 2024, primarily in the Topgolf operating segment [46]. Strategic Initiatives - The company plans to pursue a separation of the Topgolf business, with anticipated benefits and operational performance for the two independent companies post-separation [34]. - The company expects to continue investments in the business, focusing on brand momentum and demand for golf and outdoor activities [34]. - The planned separation of Topgolf and other strategic initiatives are expected to influence future financial results and market positioning [49].

Group 1 - The merger of Topgolf Callaway Brands Corp. was completed during the pandemic golf boom, leading to significant growth for the company [1] - Topgolf contributed approximately 40% of the overall revenue of the newly formed company [1] - Economic conditions normalized in FY23, resulting in tightening that may impact future performance [1]