Callaway Golf Company executives used the company’s fourth-quarter 2025 earnings call to highlight a major strategic reset that included two significant divestitures, a reshaped balance sheet, and a renewed focus on core golf equipment and apparel operations. Management said results for the quarter and full year came in better than expected on revenue and adjusted EBITDA, while the company also issued 2026 guidance that reflects tariff pressures and deliberate shifts intended to improve long-term margins.
Strategic moves: Jack Wolfskin sale and Topgolf transaction
Chip Brewer, president and CEO of Topgolf Callaway Brands (NYSE:MODG), said the company “returned to our roots” after completing the sale of the Jack Wolfskin outdoor apparel and gear business to ANTA Sports for $290 million in May and, more recently, selling a 60% stake in the Topgolf business to Leonard Green & Partners in a transaction valued at about $1.1 billion.
CFO and Chief Legal Officer Brian Lynch emphasized that the company has no future cash obligations to Topgolf. He said all Topgolf debt, venue financing, and operating leases remain with the new Topgolf entity, with “no recourse” back to Callaway. With the company now a 40% minority stakeholder in a private Topgolf entity, management said Topgolf will no longer be discussed in earnings calls.
Balance sheet update and capital allocation
Lynch said that immediately following the Topgolf transaction and debt repayment, the company had about $480 million of outstanding debt, including $258 million of convertible notes and $166 million of remaining term debt. He also reported unrestricted cash and cash equivalents of about $680 million as of January 2, 2026, putting the company in a net cash position with no net leverage.
He said the company intends to settle $250 million of convertible notes due May 2026 in cash and reiterated capital allocation priorities:
- Reinvest in the business
- Maintain a healthy balance sheet
- Return capital to shareholders through a $200 million stock purchase program announced last month
Fourth-quarter and full-year 2025 results (continuing operations)
Lynch said both Jack Wolfskin and the sold portion of Topgolf are reflected as discontinued operations, and prior periods were restated accordingly. On a non-GAAP basis for continuing operations, he said full-year consolidated net sales were down slightly, driven primarily by a 1.4% decline in soft goods amid “soft market conditions globally,” while golf equipment sales were approximately flat.
Tariffs were a central theme in the results discussion. Lynch said the company incurred $34 million of incremental tariff costs in 2025, with $25 million impacting the golf equipment segment and the remainder affecting soft goods. Consolidated gross margin declined about 60 basis points to 42.2%, which he attributed to the tariff impact. He added that the tariff costs reduced gross margin by 166 basis points.
Despite the tariff headwind, Lynch said golf equipment gross margin increased 10 basis points, and would have increased 189 basis points excluding tariffs, citing progress on margin initiatives. Operating expenses increased 1% as cost savings “offset almost all” inflationary pressures and higher annual compensation, while adjusted EBITDA totaled $222 million, down $39 million but better than expected. Lynch said foreign exchange had minimal impact for the year.
For the fourth quarter, Lynch reported consolidated sales of $368 million, down 1% year over year. The decline reflected an $11 million decrease in golf equipment sales due to fewer second-half product launches, partially offset by a $7 million increase in soft goods. Fourth-quarter gross margin fell 220 basis points to 37.4%, driven by a 340 basis point impact from incremental tariffs. Operating expenses rose $19 million due to higher annual incentive compensation, and adjusted EBITDA was negative $25 million, down $30 million year over year but “better than expected.”
Capital expenditures were $32 million in 2025.
Market backdrop and product commentary
Brewer described golf participation trends as strong, citing National Golf Foundation figures indicating U.S. rounds played rose 1.2% in 2025 and that off-course participation continued to expand. He also said Callaway maintains a top-two U.S. market share position in clubs and balls and holds a top-one or top-two club position in primary markets. He noted the Callaway and Odyssey brands recorded 61 driver wins, 92 putter wins, and 35 ball wins on global tours during the past year, and said Odyssey remained the number one putter across global tours.
Looking to 2026 product launches, Brewer said the company introduced the Quantum family of woods and irons and Odyssey Ai Dual putters, and is rolling out the second iteration of its premium Chrome Tour ball family. He highlighted the Quantum driver’s “Tri-Force Face” technology, describing it as a three-material construction (titanium, poly mesh, and carbon fiber) intended to improve speed and spin consistency.
During Q&A, Brewer told analysts that the Quantum driver was receiving “very strong feedback,” but also stressed how early the cycle is, noting the product “hasn’t launched yet” and was set to launch the next day.
2026 guidance: tariffs, mix changes, and a second-half revenue headwind
Management said it is implementing three “fundamental changes” designed to improve long-term profitability and market share, even though they are expected to reduce revenue in 2026, particularly in the second half:
- Pull back on sales of lower-margin categories and channels (including less closeout and off-price activity, less “second-year product,” and SKU rationalization; Brewer cited examples such as range balls and certain SMU product)
- Make incremental investments in the company’s fitting program
- Adjust product launch cadence by delaying a product line that would normally launch in the fall and extending product life cycles in another area
Lynch guided to full-year 2026 revenue of $1.98 billion to $2.05 billion, down slightly at the midpoint versus 2025, reflecting these changes. He guided to adjusted EBITDA of $170 million to $195 million and said the outlook includes approximately $40 million of incremental tariffs in 2026 versus 2025 (after $34 million of incremental tariffs in 2025). Lynch also cited about $16 million of lower dividend income due to a significantly lower cash balance after using $1 billion to reduce debt, though he said the company expects interest expense savings that are “overall cash flow accretive.”
Free cash flow is expected to be approximately $100 million in 2026, with capital expenditures projected at $35 million to $40 million.
For the first quarter, Lynch forecast revenue of $635 million to $665 million and adjusted EBITDA of $110 million to $125 million. He said first-quarter comparisons include an expected $24 million of incremental tariff expense versus the prior-year quarter and the lap of a $12 million benefit from the early termination of the company’s former Japan headquarters lease in the prior year.
Asked about how guidance was constructed, Brewer said the company is taking a “moderate” view and remains “cautiously optimistic,” citing the healthy golf market but noting uncertainties around peak season dynamics, price points, and weather. He said management is not providing specific long-term margin targets, but pointed to equipment gross margin expansion excluding tariffs in 2025 and reiterated that gross margin is expected to be approximately flat in 2026 despite incremental tariff costs.
About Topgolf Callaway Brands (NYSE:MODG)
Topgolf Callaway Brands plc (NYSE: MODG) is a leading global sports and entertainment company formed through the merger of Callaway Golf Company and Topgolf Entertainment Group in July 2022. The company combines Callaway’s heritage in golf equipment design and manufacturing with Topgolf’s innovative, technology-driven entertainment venues. Topgolf Callaway Brands serves a diverse audience of golf enthusiasts, casual players and social visitors, offering experiences that span both competitive sport and leisure activities.
Under the Callaway Golf brand, the company develops and markets a broad portfolio of premium golf clubs, balls, accessories and apparel.
