Topgolf Callaway Brands Corp. (MODG)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 beat Street on revenue and non-GAAP EPS, with consolidated net revenue of $1.11B (+1.7% q/q; -4.1% y/y) and non-GAAP diluted EPS of $0.24; Topgolf traffic accelerated and company raised full-year guidance despite a larger tariff headwind .
• Topgolf same-venue sales improved to -6% (better than outlook), traffic +6% in Q2 and +12% in early July; venue-level EBITDAR margins were ~flat y/y even after removing booking fees and adding value, supporting the guidance raise .
• Guidance: FY25 consolidated revenue now $3.80–$3.92B and Adjusted EBITDA $430–$490M; Topgolf revenue $1.71–$1.77B and Adjusted EBITDA $265–$295M; Q3 revenue $880–$920M and Adjusted EBITDA $78–$98M .
• Strategic process unchanged; spin impractical in 2H25 given CEO transition at Topgolf; if spin maximizes value, likely in 2026—sale remains under evaluation (potential catalyst) .

What Went Well and What Went Wrong

• What Went Well

  • Topgolf value initiatives drove a clear traffic inflection; management: “the definitive consumer reaction…reinforces our belief that we are on the right path,” with Q2 traffic +6% and July traffic +12% .
  • Golf Equipment outperformed internal expectations; operating margins roughly flat y/y despite tariffs, aided by cost reductions, healthy U.S. demand, and FX tailwinds .
  • Liquidity strengthened to $1.16B after Jack Wolfskin sale; net leverage improved (REIT-adjusted to 1.8x), creating flexibility ahead of a Topgolf separation .

• What Went Wrong

  • Topgolf same-venue sales remained negative (-6%) given mix shift to value and softness in 3+ bay corporate events (events traffic up low single digits but sales -12% in the 3+ bay bucket) .
  • Tariff headwinds increased to ~$40M from ~$25M previously, tempering earnings despite mitigation actions .
  • Active Lifestyle revenues declined y/y due to Jack Wolfskin sale and soft athleisure markets; Asia and parts of Europe softer for Golf Equipment year over year .

Financial Results

Consolidated performance vs prior periods

Q2 2025 actuals vs S&P Global consensus

Segment results (Q2 2025)

KPIs and operating metrics

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We are raising our full year guidance…while absorbing the impact of the additional tariffs…now approximately $40 million” — Chip Brewer, CEO .
• “Traffic results were up 6% in Q2 and 12% in [July]…venue level EBITDAR margins…approximately flat year over year despite eliminating booking fees [and] adding significant value” — Chip Brewer .
• “Summer Fun Pass…exceeding our expectations, selling more than 2x the number sold when we last offered [it] in 2022” — Artie Starrs, CEO Topgolf .
• “We remain 100% committed and active in the [Topgolf separation] process…a spin…would most likely occur in 2026 after we have a new CEO in place” — Chip Brewer .

Q&A Highlights

• Strategic process and timing: Spin vs sale unchanged strategically; spin timing delayed to 2026 post-CEO hire; improved Topgolf trends help all scenarios .
• Tariffs: Full-year impact increased to ~$40M (from ~$25M) due to rate changes/timing; mitigation embedded in guidance .
• Value initiatives impact: Traffic lift substantial; 50% off golf early-week while maintaining F&B pricing; Summer Fun Pass 2x prior cycle; sets stage for subscription pilot late Q3, broader Q4 .
• Labor efficiency/Toast POS: New labor model and Toast rollout driving speed of service and spend per visit; trending toward better end of 100–200 bps EBITDAR margin improvement guidance .
• Active Lifestyle/TravisMathew: Brand healthy; market down mid-to-high single digits; women’s category growing .

Estimates Context

• Q2 2025 beats: Revenue $1.111B vs $1.076B consensus*; non-GAAP diluted EPS $0.24 vs $0.027 consensus* (solid outperformance that should support estimate revisions). Values retrieved from S&P Global.
• Q3 2025: Company guides revenue $880–$920M vs consensus $903M*; no EPS guide provided (consensus -$0.217*)—range implies revenue roughly in line at midpoint; margin headwinds from tariffs/events keep EPS modest. Values retrieved from S&P Global.
• FY 2025: Consensus revenue $3.922B* vs guidance $3.80–$3.92B; given better Topgolf trends and cost saves, Street may lift Topgolf EBITDA assumptions within the company’s raised range. Values retrieved from S&P Global.

Key Takeaways for Investors

• Sustained operational execution: Broad-based beat on revenue and EPS, Topgolf traffic acceleration, and guidance raise despite bigger tariff headwinds highlight improved control of the P&L .
• Topgolf recovery is gaining traction: Value mix is driving traffic and stabilizing venue margins; subscription and football game launches plus Toast rollout are incremental catalysts into Q4/Q1 .
• Golf Equipment resilient: U.S. consumer healthy; margins holding despite tariffs; new irons/wedges and innovation pipeline support 2H .
• Separation optionality: Spin impractical near-term but sale/spin process active; improving Topgolf KPIs enhance separation math and potential valuation unlock .
• Watch the events channel: Corporate events remain a drag—conversion initiatives help, but sustained recovery would be a key upside lever .
• 2H setup: Q3 guide embeds continued SSS improvement but acknowledges tariffs/events; execution on value, subscription pilot, and POS rollout can de-risk numbers .
• Balance sheet firmer: Liquidity up and leverage down post-Jack Wolfskin sale provides flexibility during the separation process and macro uncertainty .

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Footnotes:

• S&P Global consensus figures. Values retrieved from S&P Global.

Sources: Q2 2025 earnings press release, 8-K, and call transcript; and prior-quarter materials. Specific citations inline: .