Mixed Quarterly Results at Callaway – Topgolf in Focus

Topgolf Callaway Brands Corp. has announced its financial results for the second quarter of 2024. While the company wants to send positive signals in some areas, it is struggling with some challenges and is particularly critical of developments in the Topgolf segment.

Callaway: Financial results for the second quarter

In the second quarter of 2024, the company generated a net income of 62 million dollars. Compared to the previous year, this represents a decline of 47.1 %. However, excluding certain exceptional items, adjusted income rose to $83 million, an increase of 9.9%. Adjusted EBITDA, which represents operating earnings before interest, taxes, depreciation and amortisation, was USD 206 million, exceeding expectations.

Consolidated revenue, on the other hand, fell by 1.9 % to 1,157.8 million dollars. This decline is mainly due to lower demand in the golf equipment and active lifestyle segments. In the golf equipment segment, sales fell by 8.2%, which Callaway said was the result of a planned shift of the market launch of equipment products compared to last year. This was compounded by challenges such as negative FX trends, persistently high inflation and weaker than expected visitor numbers at top golf locations.

Despite the decline in sales, the company was able to maintain its leading position in the US market for golf clubs and golf balls. Callaway’s products, in particular the new Ai Smoke clubs and Chrome Tour golf balls, continued to show strong sales figures.

Sales at Topgolf below expectations

Topgolf, a central component of the company, recorded an overall increase in sales of 5% in the second quarter of 2024, but this was mainly due to new locations. Locations that have been in operation for 24 months or more saw an 8% decline in sales. This development is due to lower customer frequency at existing locations. Commenting on Topgolf’s performance, Chip Brewer, CEO of Topgolf Callaway, said: “We have been disappointed in our stock performance for some time, as well as the more recent same venue sales performance.”

In light of these figures, the company has initiated a strategic review of Topgolf, considering various growth strategies and potential structural changes. Brewer added: “This review includes the assessment of organic strategies to return Topgolf to profitable same venue sales growth, as well as inorganic alternatives, including a potential spin of Topgolf.” However, Brewer also emphasised that the company remains a firm believer in the potential of Topgolf: “We remain convinced that Topgolf is a high-quality business with significant future opportunities. It is transforming the game of golf and we believe it will deliver significant growth and financial returns over time.”

Adjusted annual forecast and financial measures

Due to the current challenges, the company has been forced to revise its annual forecast downwards. The expected annual turnover is now between 4,200 and 4,260 million dollars, while the adjusted EBITDA is estimated at 570 to 590 million dollars.

In order to be in a stronger financial position, the company has also repaid 50 million dollars of its debt ahead of schedule and increased its liquidity, i.e. its available funds, by 136 million dollars compared to the previous year.