Topgolf Callaway Brands Corp. announced Sept. 11 that the two companies are splitting into two standalone public companies, stating that each company’s business model will be better served by operating independently from each other. The so-called “spin-off” is expected to happen in the second half of 2025.
“Today’s announcement is the result of a thorough strategic review conducted by the Board of Directors and the management team,” said John Lundgren, chairman of the board of directors of Topgolf Callaway Brands, in a news release. “The creation of two independent companies, each with a distinct focus and proven business model, is intended to drive continued momentum in both businesses and deliver value to all our shareholders.”
Callaway Golf had changed the company’s corporate name to Topgolf Callaway Brands Corp in 2022 to reflect both the merger with Topgolf in 2021, as well as its new diverse brand portfolio.
In a news release, the company explained its rationale for the split news, stating the “spin-off” will let each company enhance their strategic focus to better dial in to what their customers are looking for; optimize their capital allocation, since each company will have different financial needs; simplify their operating structure; and develop a unique “investment thesis” for future transactions that will also simplify each company’s financial reporting.
Callaway will continue to be led by Chip Brewer, president and chief executive officer. It will maintain control of its portfolio of brands that includes Callaway, Odyssey, TravisMathew, OGIO, Jack Wolfskin and Toptracer.
Topgolf will continue to be led by CEO Artie Starrs. Its portfolio will consist of the more than 100 venues that it currently operates. After the split, it will have large balance of cash and no financial debt, which will allow it to focus on a number of priorities as an independent company: “drive profitable same venue sales growth, increase venue operating margins through further improvements in operating efficiencies and pursue new venue development, resulting in meaningful revenue growth, bottom-line operating leverage and accelerating profitability.”
One of the ways Topgolf plans to execute its goals is by reducing its development plans for new venues in 2025 to a number in the mid-single digit range. Ever since the initial merger in 2021, the stock price for Topgolf Callaway Brands has declined from $28.60 to $10.76 at the close of trading on Wednesday, and recent financial reporting has shown that Topgolf’s same-venue sales in the first half of 2024 were down some 8 percent vs. the same six-month period in 2023. Brewer made a statement a month ago that both the company and its investors were disappointed in its overall stock performance as well as its same-venue sales.
In August, Topgolf Callaway reported second-quarter revenue of $494 million, with an overall six-months revenue of more than $917 million. While those figures denote an increase ($423 vs $494 million), they’re the result of new venue openings. The company even reported that traffic had slowed to its existing Topgolf locations.
While the company had no further comment on the details of the announcement, saying that they are entering a quiet period from an investor relations perspective, Brewer added that they are excited about growing and developing Toptracer.
“Not much will change in the actual business for the foreseeable future,” Brewer said. “Toptracer already has a separate organization with key partnerships both at Topgolf and Callaway.”
The separation of the companies seems all but certain, though because of the long lead up to the proposed mid-2025 date, the company hedged somewhat by stating that other options will be explored in the meantime and that any new developments will be taken under advisement. Any subsequent updates or changes will be disclosed to the shareholders as well as the public.
