In a call with Wall Street analysts this evening, Topgolf Callaway Brands (MODG: NYSE) President/CEO Chip Brewer revealed little about his company’s plans to separate the two brands, as announced last year.
“We are productively working toward the separation of Topgolf, evaluating both the spin in the second half of this year and a potential sale,’’ Brewer said. “There is nothing new to report on this process, other than all options are still on the table and we’re making steady progress.
“As a Board and as a management team, we’re going to ensure that both businesses are in strong financial and strategic positions at the time of separation. There are a lot of different paths for that, and that’s a commitment of ours.’’
Topgolf Callaway Brands Q4 Loss
Callaway Topgolf Brands reported a Q4 2024 loss of $1.45 billion after the market closed on 24 February. Revenue was $924.4 million, an increase of three percent, primarily due to increases in golf equipment.
The Q4 loss created a 2024 full-year loss of $1.26 billion on revenue of $4.24 billion—a one percent decrease year over year. This was primarily due to decreases in the Korea business and the Jack Wolfskin Europe business due to soft market conditions in those markets.
The $1.45 billion loss in Q4, Topgolf Callaway Brands CFO Brian Lynch said, was because of a noncash accounting charge related to the impairment of the Topgolf goodwill and intangible assets.
In March 2021, Callaway Golf merged with Topgolf for what Lynch called “an implied negotiated price” of $1.987 billion, payable in common stock. However, according to Lynch, the stock price increase between signing and closing impacted the purchase price for accounting purposes.
“As a result,’’ Lynch said. “We recorded a $3.1 billion purchase price, even though no additional shares were issued. Following the impairment, the remaining carrying value of the Topgolf assets on our books is $1.6 billion. Importantly, this noncash charge does not impact our liquidity or operational flexibility.’’
Nevertheless, the impairment could be an indication that Callaway might have overpaid for Topgolf.
The “B” word aside, the company reported Topgolf’s Q4 2024 revenue at $439 million, flat compared to Q4 of ‘23. Same-venue sales were down eight percent versus Q4 of ‘23, but Brewer said, “slightly better’’ than expectations due to improving traffic trends.
A similar sharp decline in same-venue sales in Q2 of 2024 surprised Topgolf Callaway management, sparked even more questions about Topgolf’s growth and sustainability, and led to a drop in the stock price from $12.22 on Aug. 7, 2024, to a 52-week low of $6.68 on Feb. 24, before a same-day close at $6.70.
Topgolf Callaway Brands Corp. (NYSE: MODG) is an unrivaled tech-enabled Modern Golf and active lifestyle company with a portfolio of global brands, including Topgolf, Callaway Golf, TravisMathew, Toptracer, Odyssey, OGIO, and Jack Wolfskin.
