Topgolf Callaway Brands (MODG) - 2025 Q4 - Annual Results

Financial Performance - Q4 2025 net sales were $367.5 million, a decrease of 1.1% year-over-year, while full year net sales were $2,060.1 million, down 0.8% compared to 2024[4][11] - Q4 2025 adjusted EBITDA was negative $25.1 million, a decrease of $29.5 million from the prior year, primarily due to $12 million in incremental tariff expenses and a $19 million increase in annual incentive compensation[10][14] - Full year net income from continuing operations was $38.8 million on a GAAP basis, a decrease of 58.5% compared to 2024[14] - Total segment operating income for Q4 2025 was $(21.8) million, a decrease of $28.0 million compared to Q4 2024, which reported $6.2 million[17] - For the full year 2025, total segment operating income was $257.9 million, down $25.3 million from $283.2 million in 2024[17] - Operating loss for Q4 2025 was $54.1 million, compared to a loss of $24.6 million in Q4 2024, representing a 119.9% increase in losses[39] - Net income from continuing operations for the twelve months ended December 31, 2025, was $38.8 million, down from $93.4 million in 2024[40] - Total operating income for the twelve months ended December 31, 2025, was $128.1 million, a decrease of 16.2% from $152.9 million in 2024[40] - Net loss from continuing operations was $0.5 million for 2025, compared to a net income of $93.4 million in 2024[45] - Diluted earnings per share from continuing operations for 2025 were $0.21, compared to $0.50 in 2024[45] Revenue Guidance and Projections - The company initiated 2026 revenue guidance of $1.98 billion to $2.05 billion and adjusted EBITDA guidance of $170 million to $195 million[3] - The company expects consolidated net sales for 2026 to be between $1.98 billion and $2.05 billion, compared to $2.06 billion reported in 2025[20] - Adjusted EBITDA from continuing operations for 2026 is estimated to be between $170 million and $195 million, down from $222 million in 2025[20] - For Q1 2026, consolidated net sales are projected to be between $635 million and $665 million, compared to $630 million in Q1 2025[21] Cash Position and Debt Management - Callaway Golf Company returned to a pure play golf equipment company after selling Jack Wolfskin and a 60% stake in Topgolf, resulting in a net cash position of approximately $680 million and gross debt of about $480 million[2][3] - The company plans to utilize its cash position to pay off convertible debt and initiate a $200 million share repurchase program[2][3] - The company had approximately $680 million in unrestricted cash and cash equivalents as of January 2, 2026, following a $1 billion partial repayment of its term loan[19] - The company plans to pay off $258 million of convertible notes upon maturity in May 2026[19] - Cash and cash equivalents increased to $903.2 million as of December 31, 2025, from $445.0 million in 2024[33] - Long-term debt decreased significantly to $650.7 million in 2025 from $1,414.3 million in 2024[33] - The company aims to maintain a net cash to zero net leverage position throughout 2026[19] Segment Performance - Golf Equipment segment net sales for Q4 2025 were $213.9 million, down 4.9% year-over-year, while Apparel, Gear and Other segment sales increased by 4.8% to $153.6 million[15] - Golf Clubs sales declined by 7.1% to $166.1 million in Q4 2025 from $178.8 million in Q4 2024[37] - The Apparel, Gear, and Other segment saw a revenue increase of 4.8% in Q4 2025, reaching $153.6 million compared to $146.5 million in Q4 2024[39] Cost and Margin Analysis - Full year GAAP gross margin declined by approximately 60 basis points to 42.1%, impacted by $34 million in additional tariff expenses[12] - The company experienced a decline in gross margin due to a 340-basis point impact from incremental tariffs in Q4 2025[8] - Gross profit for the same period was $867.6 million, resulting in a gross margin of 42.1%, compared to 42.7% in 2024[45] - Total cost of sales for the twelve months ended December 31, 2025, was $1,192.5 million, compared to $1,190.7 million in 2024[45] Restructuring and Transformation Efforts - The company incurred $5.5 million in restructuring charges related to the Transformation Plan during the fiscal year 2025[45] - The company is undergoing restructuring and reorganization charges related to its Transformation Plan, impacting financial results[47] - IT integration costs associated with a new cloud-based HRM system were incurred, reflecting ongoing technological advancements[47] - The company is centralizing warehousing and distribution operations to achieve synergies from recent acquisitions[47] - Future outlook includes continued focus on restructuring efforts and integration of new technologies to enhance operational efficiency[47]