Topgolf Callaway Brands (US:MODG)2025-11-06 22:03Revenue Performance - Net revenues for the three months ended September 30, 2025 decreased by $78.9 million or 7.8% compared to the same period in 2024, with a 3.2% increase when excluding the impact of the Jack Wolfskin sale[153]. - For the nine months ended September 30, 2025, net revenues decreased by $178.1 million or 5.4%, with a 1.1% decrease when excluding the Jack Wolfskin sale[154]. - Total net revenues for the three months ended September 30, 2025, were $934.0 million, a decrease of $78.9 million (7.8%) compared to $1,012.9 million in the same period of 2024[156]. - Topgolf net revenues increased by $19.0 million (4.2%) for the three months ended September 30, 2025, primarily due to new venue openings and improved traffic trends[157]. - Golf Equipment net revenues rose by $11.8 million (4.0%) for the three months ended September 30, 2025, driven by a 3.5% increase in golf club sales and a 5.6% increase in golf ball sales[159]. - Active Lifestyle segment saw a revenue decline of $109.7 million (41.2%) for the three months ended September 30, 2025, largely due to the sale of the Jack Wolfskin business[161]. - The ongoing business net revenues for the nine months ended September 30, 2025, were $3,041.2 million, a decrease of $33.2 million (1.1%) compared to $3,074.4 million in 2024[156]. Segment Performance - Segment operating income decreased by $6.5 million or 8.7%, primarily due to a decline in the Active Lifestyle segment following the Jack Wolfskin sale[153]. - The Golf Equipment segment saw an increase in net revenues, while Topgolf and Active Lifestyle segments experienced declines[154]. - Segment operating income for Topgolf increased by $2.8 million (9.9%) for the three months ended September 30, 2025, despite rising operating expenses[158]. - Golf Equipment segment operating income decreased by $3.6 million for the three months ended September 30, 2025, primarily due to $8.0 million in incremental tariffs[160]. Geographic Revenue Trends - Revenue from the United States for the three months ended September 30, 2025, was $749.9 million, an increase of $25.3 million (3.5%) compared to $724.6 million in 2024[163]. - Net revenues in the United States increased by $25.3 million (3.5%) for the three months ended September 30, 2025, compared to the same period in 2024, driven by new Topgolf venues and increased Golf Equipment sales[165]. - For the nine months ended September 30, 2025, net revenues in the United States decreased by $42.4 million (1.7%) due to declines in same venue sales and Golf Equipment sales, partially offset by new Topgolf venues[166]. - In Europe, net revenues decreased by $68.9 million (50.4%) and $89.0 million (22.7%) for the three and nine months ended September 30, 2025, respectively, primarily due to the sale of the Jack Wolfskin business[167]. - In Asia, net revenues decreased by $36.4 million (28.7%) and $44.5 million (12.2%) for the three and nine months ended September 30, 2025, respectively, due to the sale of Jack Wolfskin and soft market conditions[168]. Cost and Expense Management - Total costs and expenses decreased by $73.5 million (7.5%) for the three months ended September 30, 2025, and by $175.1 million (5.6%) for the nine months ended September 30, 2025[171]. - Cost of products decreased by $49.4 million (15.0%) and $97.5 million (8.7%) for the three and nine months ended September 30, 2025, respectively, primarily due to lower sales in the Active Lifestyle segment[172]. - Selling, general and administrative expenses decreased by $40.0 million (16.0%) for the three months ended September 30, 2025, and by $72.8 million (9.3%) for the nine months ended September 30, 2025, mainly due to the sale of Jack Wolfskin and cost reduction efforts[175][177]. - Research and development expenses decreased by $1.9 million (8.6%) and $11.0 million (15.2%) for the three and nine months ended September 30, 2025, respectively, due to reduced employee costs from business sales and restructuring[178]. Financial Position and Liquidity - Cash and cash equivalents increased by $415.6 million to $865.9 million as of September 30, 2025, primarily due to cash provided by operating activities of $270.1 million[191]. - Consolidated net accounts receivable rose to $218.5 million as of September 30, 2025, up from $175.7 million at December 31, 2024, reflecting seasonality in Golf Equipment sales[192]. - Inventory decreased by $188.6 million to $568.7 million as of September 30, 2025, compared to December 31, 2024, largely due to the sale of the Jack Wolfskin business[193]. - As of September 30, 2025, the company had $1,254.2 million in combined cash and availability under credit facilities, an increase of $391.2 million compared to September 30, 2024[196]. - Approximately 15% of the company's cash was held outside the United States as of September 30, 2025, maintaining an indefinite reinvestment assertion in most jurisdictions[197]. - The company plans to utilize its liquidity and cash flows from operations to fund significant cash obligations as of September 30, 2025[198]. Debt and Obligations - Total debt amounts to $1,529.4 million, with $1,157.9 million due thereafter[199]. - Interest payments related to total debt are projected at $431.9 million, with $186.6 million due in 2026-2027[199]. - Operating leases total $2,205.8 million, with $1,556.2 million due thereafter[199]. - Total estimated capital expenditures for the year ending December 31, 2025, are expected to be approximately $160.0 million, including $120.0 million for the Topgolf business[205]. - Future minimum lease payments for leases not yet commenced total $610.9 million[201]. - DLF obligations related to Topgolf venue construction amount to $5,116.2 million, with $4,676.9 million due thereafter[199]. - Unconditional purchase obligations total $116.6 million, with $70.8 million due in 2026-2027[199]. Economic and Market Conditions - Macroeconomic factors, including sustained inflation and high interest rates, are impacting consumer discretionary spending[149]. - The company is actively monitoring the effects of tariffs and inflation on its costs and pricing strategies[150][152]. - Inflation has contributed to increased costs, potentially affecting gross margins and operating expenses[213]. - A 10% increase in interest rates would result in an incremental expense of $3.5 million over the next 12 months[212]. - The estimated loss from foreign currency forward contracts is $12.4 million, based on a sensitivity analysis model[210]. Tax and Net Income - The provision for income tax increased by $11.8 million to a benefit of $7.6 million for the three months ended September 30, 2025, with an effective tax rate of 34.2% compared to 84.3% in the prior year[185]. - For the three months ended September 30, 2025, the GAAP net loss increased to $14.7 million, compared to a net loss of $3.6 million for the same period in 2024, representing an increase of $11.1 million[4]. - Non-GAAP net loss for the three months ended September 30, 2025 was $9.2 million, compared to a net income of $4.3 million for the same period in 2024, indicating a decrease of $13.5 million[188]. - For the nine months ended September 30, 2025, GAAP net income decreased to $7.7 million from $65.0 million in 2024, a decline of $57.3 million[189]. - Non-GAAP net income for the nine months ended September 30, 2025 was $56.7 million, down from $101.8 million in 2024, reflecting a decrease of $45.1 million[190].