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Highlights

  • MODG’s Q2 FY24 saw a 1.9% sales drop and 47.1% income decline
  • From 2019-2023, revenues grew at 28.08% CAGR
  • In 2024, the company plans to split into Callaway and Topgolf, adjusting revenue forecasts

Topgolf Callaway Brands Corp. (NYSE: MODG) is a golf and active lifestyle company. It has a market cap of USD 1.98bn.

In the second quarter of FY24, the company posted a decrease in net sales and net income of approximately 1.9% and 47.1%, respectively. The drop in sales was largely attributed to an 8.2% decline in golf equipment sales, which stemmed from a strategic adjustment in the timing of equipment launches.

However, from 2019 to 2023, the company reported decent financial growth, with revenues rising at a 28.08% CAGR from USD 1,701.1 million to USD 4,284.8 million, and gross profit increasing at a 35.62% CAGR from USD 766.8 million to USD 2,654.1 million. Gross margin improved from 45.08% to 61.94%. In Q1 FY2024, MODG achieved a gross margin of 60.3% and an EBITDA margin of 12.2%, both exceeding industry medians.

Recent Business Update

On September 4, 2024, the company announced that its board of directors plan to split its business into two distinct entities. The first, Callaway, will focus on its leadership in golf equipment and its complementary Active Lifestyle business, with a revenue of about USD 2.5 billion for the last twelve months through Q2 2024, including Toptracer. The second entity, Topgolf, will specialise in venue-based golf entertainment, reflecting a high-growth trajectory with a revenue of approximately USD 1.8 billion over the same period, excluding Toptracer.

Company Outlook

For 2024, the company expects consolidated net revenues of USD 4.2 to USD 4.26 billion, down from the earlier estimate of USD 4.435 to USD 4.475 billion. Topgolf’s revenue is projected at about USD 1.79 billion, with same-venue sales growth anticipated to decline in the high single to low double digits. Consolidated adjusted EBITDA is forecasted between USD 570 and USD 590 million, with Topgolf’s adjusted EBITDA around USD 310 million. Non-GAAP diluted earnings per share are estimated at USD 0.11 to USD 0.21, based on 185 million shares. For Q3 2024, net revenues are expected to be USD 970 to USD 990 million, with adjusted EBITDA ranging from USD 95 to USD 105 million.

Top 10 Shareholders

The top 10 shareholders of MODG collectively hold approximately 60.74% of the company's shares, indicating a concentrated ownership structure. Providence Equity Partners LLC and BlackRock Institutional Trust Company, N.A. are the largest shareholders, with stakes of 11.54% and 11.45%, respectively.

Stock Performance

The stock price of MODG has declined by 31.15% over the past three months and 22.42% in the last six months. Currently, it is trading near the upper end of its 52-week range, with a high of USD 17.40 and a low of USD 9.84.

Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is September 04, 2024. The reference data in this report has been partly sourced from EODHD/Others.