Topgolf Callaway Brands: Profiting from a Growing Trend

Topgolf Callaway Brands is a unique company at the intersection of sports entertainment, performance equipment, and active lifestyle apparel. With a portfolio that includes Topgolf’s interactive golf venues, market-leading Callaway golf clubs and balls, and fast-growing brands like TravisMathew, the company spans the full spectrum of the modern golf experience. As it prepares to spin off Topgolf into a standalone business, the company is sharpening its strategic focus and unlocking new paths for growth. The question is: Should this golf and lifestyle hybrid earn a place in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Topgolf Callaway Brands at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Topgolf Callaway Brands, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Topgolf Callaway Brands Corp. is a modern golf and active lifestyle company that operates through three interconnected business segments: Topgolf, Golf Equipment, and Active Lifestyle. Originally founded as Callaway Golf Company in 1982, the firm rebranded in 2022 following its acquisition of Topgolf, a leading tech-enabled golf entertainment platform. The merger transformed the business into a vertically integrated company that spans casual play, performance equipment, and lifestyle products. The Topgolf segment includes over 100 venues worldwide, offering immersive, gamified golf experiences that combine sport, dining, and social entertainment. These venues generate revenue through gameplay, food and beverage sales, private events, and advertising. In addition, Topgolf licenses its proprietary Toptracer ball-tracking technology to driving ranges and broadcasters, extending the brand’s reach and enhancing digital engagement. The business benefits from high barriers to entry - due to capital intensity, real estate, and operational complexity - and enjoys a durable competitive position as the market leader in off-course golf entertainment. In the Golf Equipment segment, the company designs and sells golf clubs and balls under the Callaway and Odyssey brands. Callaway has held the number one U.S. market share in golf clubs for multiple years and ranks among the leaders in golf balls, supported by continuous innovation, strong distribution, and investment in R&D. The Active Lifestyle segment includes golf and casual apparel, footwear, bags, and accessories under brands such as TravisMathew, OGIO, and Callaway Apparel. These brands appeal to both golf enthusiasts and broader lifestyle consumers, and benefit from growing direct-to-consumer channels and global retail presence. Topgolf Callaway’s competitive moat is rooted in its strong brand portfolio, vertically integrated golf ecosystem, and scale advantages. The company captures value across the entire golf consumer journey—from introducing newcomers to the sport through Topgolf venues, to serving committed golfers with Callaway equipment and lifestyle gear. Its leadership in off-course golf entertainment is reinforced by network effects and venue uniqueness, while its equipment and apparel segments benefit from brand equity, global reach, and marketing synergies across its portfolio. In 2024, the company announced plans to separate Topgolf and Callaway into two independent, publicly traded entities by the second half of 2025. This move follows a strategic review aimed at maximizing long-term shareholder value by giving each business the flexibility to pursue its own growth strategy. After the separation, Topgolf will focus on its entertainment venues and related technologies, while Callaway will retain the golf equipment and active lifestyle brands. The company believes this structure will unlock greater strategic clarity, operational efficiency, and value creation as each entity focuses on its core strengths.

Management

Oliver “Chip” Brewer has served as the CEO of Topgolf Callaway Brands since 2012. He joined the company - then known as Callaway Golf Company—after leading Adams Golf as CEO for over a decade. Under his leadership, Adams Golf gained recognition for its innovation in hybrid golf clubs and was ultimately acquired by TaylorMade-adidas Golf in 2012. Chip Brewer holds an MBA from Harvard Business School, earned in 1991, and brings deep operational experience and strategic insight into the golf industry. A lifelong golf enthusiast, he has previously served on the board of the National Golf Foundation and has noted that while you don’t need to be a passionate golfer to run a golf company, the industry can be surprisingly complex and difficult to fully understand. Since taking the helm at Callaway, Chip Brewer has reshaped the company through a series of bold portfolio decisions and strategic investments. He oversaw the divestiture of legacy brands like Top-Flite and Ben Hogan, streamlined operations, and steered the company into higher-growth segments through acquisitions such as TravisMathew, OGIO, and Jack Wolfskin. Most notably, he led the transformative acquisition of Topgolf Entertainment Group in 2021 - a move that expanded Callaway beyond equipment and into experiential golf entertainment, prompting a rebrand to Topgolf Callaway Brands in 2022. Known for his calculated risk-taking and long-term vision, Chip Brewer has demonstrated a willingness to evolve the company’s identity to reflect changing consumer behaviors in golf and active lifestyle markets. His leadership has not only diversified the company’s revenue streams but also positioned it as a vertically integrated leader in the modern golf ecosystem. According to Comparably, Brewer holds a CEO approval rating of 93/100, placing him among the top 5% of CEOs at similarly sized companies, based on employee reviews. As Topgolf Callaway prepares to split into two independent public companies by 2025, Chip Brewer’s ability to manage complex transitions and allocate capital strategically will likely play a key role in ensuring the success of both entities. Given his track record of brand-building, operational discipline, and bold strategic pivots, I believe Chip Brewer is well-equipped to lead Topgolf Callaway Brands through its next phase of transformation and value creation.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Topgolf Callaway Brands has delivered an underwhelming ROIC in most years, and it hasn’t surpassed 10% since the acquisition of Topgolf in 2021. There are several reasons for this. The acquisition brought with it a capital-intensive business model. Each Topgolf venue requires significant upfront investment, with average development costs of around $30 million per site. While these venues have broadened the company’s revenue streams, the high fixed costs and slower ramp-up periods have weighed on overall returns. In addition, the synergies expected from integrating Topgolf with Callaway’s core equipment and apparel businesses may be slower to emerge than initially hoped. Merging two very different business models - premium consumer products and experiential entertainment - can be complex, especially when it involves aligning operations, culture, and long-term strategy. In response to these challenges, the company announced in September 2024 that it plans to separate into two independent, publicly traded entities by the second half of 2025: one focused on Topgolf’s entertainment venues and technologies, and the other on Callaway’s golf equipment and lifestyle brands. The move is intended to sharpen strategic focus and improve capital allocation, which could lead to stronger financial performance at both companies. Hence, we can hope for an improved ROIC moving forward.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Topgolf Callaway Brands had steadily increased its equity every year since, with the exception of 2020, which was negatively impacted by the pandemic, and 2024. The company saw a notable boost in equity in 2021 following the acquisition of Topgolf. However, in 2024, equity dropped sharply due to a large accounting adjustment. The company reassessed the value of the Topgolf business and concluded it was worth $1.45 billion less than previously reported. This wasn’t a cash loss, but rather a non-cash write-down caused by weaker performance at Topgolf venues and broader economic headwinds that made future earnings from the business less certain. While this write-down didn’t affect the company’s cash or day-to-day operations, it reduced the value of Topgolf’s assets on the balance sheet - and therefore lowered the company’s total equity. It also signaled that the benefits expected from the Topgolf acquisition may take longer to materialize than originally hoped.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share.  Topgolf Callaway Brands had consistently achieved positive free cash flow in all years prior to the acquisition of Topgolf. However, following the acquisition, the company reported negative free cash flow for three consecutive years - from 2021 through 2023. This was largely due to the high capital expenditures associated with building new Topgolf venues, which often cost around $30 million each. Although the business continued to generate solid cash from operations, the heavy investment in growth dragged down reported free cash flow. To provide a clearer picture, management introduced the concept of embedded free cash flow, which excludes growth-related capital expenditures - specifically, spending on new Topgolf venues and retail stores. On this adjusted basis, the company actually delivered positive free cash flow during this period, suggesting the core operations remained healthy despite the investment phase. In 2024, Topgolf Callaway Brands reported positive free cash flow under the standard definition for the first time since 2020. This improvement was driven by a combination of reduced capital expenditures - thanks to a slower pace of new venue openings - and stronger operating cash flow supported by improved efficiency across segments. This is an encouraging sign that the company is becoming more financially self-sustaining. The free cash flow yield indicates that shares may currently be undervalued, but we will revisit valuation later in the analysis.

Debt

Another important aspect to consider is the level of debt. It is crucial to determine whether a business has manageable debt that can be repaid within a three-year period. We calculate this by dividing the total long-term debt by earnings. Topgolf Callaway Brands had negative earnings in 2024 due to the impairment of the Topgolf business. Hence, we will use adjusted earnings in this calculation to determine the earnings-to-debt ratio. After performing the calculation, I found that the company has 15,5 years of earnings in debt, which is significantly higher than I would like to see. The reason for the high debt is the acquisition of Topgolf, and it has increased further due to the continued opening of new venues—a decision that could prove wise in the long run if those venues generate strong returns over time. Nonetheless, I believe that debt is worth monitoring if you are going to invest in Topgolf Callaway Brands.

Support the Blog

I want to keep the blog free and accessible for everyone. If you enjoy the content and would like to support it, you can buy me a cup of coffee through PayPal. Every little bit helps and is truly appreciated!

Risks

Competition is a risk for Topgolf Callaway Brands. The company faces intense competition across all of its business segments, from entertainment to equipment to apparel. In the Topgolf segment, the company competes for consumers’ leisure time and entertainment spending in a crowded market that includes not only other golf-related venues but also sports activity centers, arcades, bowling alleys, restaurants, movie theaters, and even home-based options like gaming and streaming. Many of these competitors have stronger brand recognition, longer operating histories, or larger financial resources, which gives them an edge in attracting customers or offering lower prices. In golf equipment, Topgolf Callaway competes with well-established brands like Titleist, TaylorMade, Ping, and Cobra, many of which invest heavily in innovation, marketing, and sponsorships. Titleist, for example, holds around 50% of the U.S. golf ball market. In the Active Lifestyle segment, brands like TravisMathew face pressure from both golf-focused apparel companies and mainstream lifestyle brands sold in department stores and online, such as Nike, Bonobos, and Peter Millar. In many of these markets, Topgolf Callaway is not the leader and lacks some of the scale, distribution power, and brand familiarity that its competitors possess. If the company cannot continue to differentiate through product innovation, premium positioning, and brand experience, it risks losing market share or being forced to compete on price - both of which could hurt margins and profitability.

Macroeconomics is a risk for Topgolf Callaway Brands. The company’s business depends heavily on discretionary consumer spending, which tends to fluctuate with broader economic conditions. Its products - whether golf clubs, apparel, or entertainment experiences at Topgolf venues - are not essentials, but rather recreational purchases. During periods of economic uncertainty, inflation, or rising interest rates, consumers and businesses may cut back on non-essential spending, including golf equipment and out-of-home entertainment. This sensitivity to economic cycles means that weaker consumer confidence, higher unemployment, or reduced disposable income can directly impact sales and venue traffic. In a prolonged downturn, even loyal customers may delay upgrades, reduce visits, or spend less per trip. On the wholesale side, retailers and distributors may also be affected by tighter credit conditions, leading to lower orders or slower payments, which can strain Topgolf Callaway Brands' cash flow and working capital. Additionally, during economic downturns, corporate spending on events may decline, retailers may reduce or delay orders, and rising input costs could squeeze margins - adding further pressure to the company’s financial performance. In short, the company’s performance is closely tied to the health of the broader economy, making macroeconomic conditions a key risk to monitor.

Seasonal fluctuations are a risk for Topgolf Callaway Brands. The company’s revenue is influenced by both seasonal and non-seasonal patterns across all three of its business segments - Topgolf, Golf Equipment, and Active Lifestyle. For the golf equipment business, first-quarter sales are typically driven by the sell-in of new products to retailers ahead of the golf season, while second and third quarters depend on how well those products sell through to end customers. Retailers often hesitate to place reorders if they’re holding excess inventory, whether from Topgolf Callaway or competitors. Golf ball sales, in particular, are closely tied to the number of rounds played, which tend to increase during spring and summer. In contrast, fourth-quarter golf sales are usually weaker due to colder weather and the announcement of next season’s product lines, which can cause customers to delay purchases. The Active Lifestyle segment, including apparel and outerwear, is also exposed to weather patterns. Warmer-than-normal winters or cooler-than-expected summers can reduce demand and lead to inventory build-up, which affects future orders and margins. The Topgolf segment also experiences higher traffic and revenue during the second and third quarters, while colder months typically see a slowdown, especially in markets where venues are not fully enclosed. Unusually severe weather - such as extreme cold, snowstorms, or wildfires - can reduce foot traffic and significantly impact venue-level performance. In early 2025, for example, same-venue sales were negatively affected by harsh winter weather and the LA fires, with venues facing unfavorable weather seeing sales drop by high teens compared to the prior year. Since the upfront investment in each Topgolf venue is substantial, poor performance at even a small number of locations can impact overall profitability. As such, both seasonal shifts and unexpected weather events can materially affect the company’s performance and should be viewed as an ongoing risk.

Reasons to invest

Improving performance at Topgolf is a key reason to consider investing in Topgolf Callaway Brands. Despite a tough economic environment and slower sales at some venues, Topgolf delivered strong results in 2024, including over $100 million in free cash flow - its second year in a row of bringing in more cash than it spent. At the same time, the business is moving through what management calls a three-phase growth plan. In Phase 1, the focus was on opening new venues quickly and making each location more profitable. That phase was successful, but it came with short-term trade-offs - building new venues is expensive, so earnings were held back by higher borrowing costs and upfront expenses. The company is now in Phase 2, which focuses on running the business more efficiently, boosting cash flow, and keeping earnings steady. Starting in 2025, management expects to enter Phase 3, when Topgolf will be bringing in more cash than it needs to grow, allowing profits to rise more quickly. They believe this turning point will lead to stronger financial performance over the next few years. Operationally, Topgolf continues to do well. Player satisfaction metrics—like likelihood to return, fun ratings, and perceived value - all improved in 2024. The company is also offering more themed experiences like DJ Nights and Sunday Funday, which are already driving higher traffic and stronger food and drink sales. It’s also making improvements behind the scenes, like simplifying the online booking process, testing new price models, and rolling out mobile ordering to improve what’s called in-bay monetization - that means helping guests spend more while they’re in their hitting bay by making it easier to order food, drinks, or extras without leaving their spot. This lets Topgolf earn more from each visit, even if overall traffic doesn’t grow immediately.

The Golf Equipment segment is a compelling reason to invest in Topgolf Callaway Brands. The sport of golf remains vibrant and healthy. In 2024, rounds played in the U.S. grew by 2%, marking the fifth consecutive year with over 500 million rounds played. On-course participation increased by 1,5 million golfers to 28,1 million, indicating rising interest and steady demand. Within this growing market, Callaway has continued to shine as a leader in equipment innovation and performance. In 2024, the Golf Equipment segment delivered strong results, maintaining the number one market share in U.S. golf clubs for the third consecutive year. Callaway ranked first in Total Clubs, Drivers, Fairway Woods, and Hybrids. The Ai One putter line contributed significantly to growth, while the launch of the Chrome Tour ball helped solidify the brand’s position as the number two golf ball in the U.S. These products earned high marks for innovation, consumer satisfaction, and performance on tour. Looking ahead, management remains confident in the long-term health of the category and expects to grow Golf Equipment revenue slightly faster than the overall market - something Callaway has a strong track record of doing. The company is also targeting gross margin improvements through operational initiatives. In short, the Golf Equipment segment combines leading market share, strong product momentum, and exposure to a sport that continues to attract new players - making it a stable and growing part of the investment thesis.

The sale of Jack Wolfskin is a reason to invest in Topgolf Callaway Brands. While the company’s TravisMathew brand continues to perform well - posting growth in both revenue and profit - Jack Wolfskin has been a consistent underperformer within the Active Lifestyle segment, particularly in the European market. Although efforts were made to restructure and streamline the business in 2024, Jack Wolfskin remained a small, low-margin contributor that weighed on the segment’s overall performance. In 2024, management took decisive action by selling Jack Wolfskin to ANTA Sports for $290 million in cash. This move allows Topgolf Callaway to exit a non-core, low-return business and refocus its resources on higher-growth and more profitable areas, such as TravisMathew and Golf Equipment. The sale improves the company’s financial flexibility by strengthening the balance sheet and freeing up capital that can be reinvested into growth initiatives with higher returns. TravisMathew, now the larger brand within the segment, continues to gain market share and expand into new categories like women’s apparel and outerwear, offering a more attractive growth profile. Looking ahead, the company expects Active Lifestyle revenues to decline modestly due to the removal of Jack Wolfskin, but operating income is projected to increase - reflecting the improved quality and profitability of the remaining portfolio. In short, the divestiture sharpens strategic focus, eliminates a chronic drag on earnings, and enhances the company’s ability to invest in its most promising brands - making it a meaningful part of the long-term investment case.

Upgrade Your Investment Research — Black Friday Deals Are Live

If you’ve been thinking about improving your research process or getting deeper insights into the market, now’s the time.

Seeking Alpha just launched their Black Friday offer — their biggest of the year.

These deals are available until December 10:

·Premium: $299 → $239/year (Save $60) + 7-day free trial for new users

You can try all Premium features — full access to analysis, stock ratings, and data tools — completely free for 7 days.

If you don’t like it, just cancel within the trial period and it won’t cost you anything.

👉 Get the Premium offer here

·Alpha Picks: $499 → $399/year (Save $100)

This service has returned +287% vs. the S&P 500’s +77% since July 2022.

👉 Get the Alpha Picks offer here

·Bundle (Premium + Alpha Picks): $798 → $574/year (Save $224)

Their best-value offer, combining in-depth research and top stock recommendations in one package.

👉 Get the Bundle offer here

I personally find Seeking Alpha’s Premium tools and analysis extremely helpful for company research, portfolio tracking, and discovering new investment ideas.

Take advantage of the offer while it lasts — it’s only available once a year.

Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an adjusted EPS of 0,51, which is from the year 2024. I have selected a projected future EPS growth rate of 15%. Finbox expects EPS to grow by 16,9% in the next five years, but 15% is the highest I use. Additionally, I have selected a projected future P/E ratio of 30, which is double the growth rate. This decision is based on Topgolf Callaway Brands' historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $15,30. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Topgolf Callaway Brands at a price of $7,65 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 382, and capital expenditures were 295. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 207 in our calculations. The tax provision was -26. We have 183,8 outstanding shares. Hence, the calculation will be as follows: (382– 207 - 26) / 183,8 x 10 = $8,11 in Ten Cap price.

The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With Topgolf Callaway Brands' free cash flow per share at $0,47 and a growth rate of 8%, if you want to recoup your investment in 8 years, the Payback Time price is $7,42.

Conclusion

I believe Topgolf Callaway Brands is an interesting company with a management team that appears well-equipped to lead it forward. The company has built a moat through its strong brand portfolio, vertically integrated golf ecosystem, and scale advantages. While it has delivered a low ROIC since the Topgolf acquisition, the upcoming separation of the businesses could lead to stronger financial performance at both companies and ultimately improve ROIC. In 2024, the company returned to positive reported free cash flow after several years of negative results, which is encouraging. Competition remains a risk, as Topgolf Callaway operates in highly competitive markets across entertainment, golf equipment, and lifestyle apparel - where many rivals benefit from stronger brand recognition, larger customer bases, or greater financial resources. Without continued innovation and differentiation, the company risks losing market share or facing margin pressure. Macroeconomic conditions also pose a risk. Since its products and services are discretionary, periods of economic slowdown, reduced consumer confidence, or tighter corporate budgets can impact sales, cash flow, and profitability. Seasonal fluctuations are another challenge. The company tends to perform better in warmer months across all segments, while unexpected weather events - such as storms or wildfires - can further disrupt results and profitability. On the positive side, improving performance at Topgolf is encouraging. The business is now generating free cash flow, improving venue-level profitability, and entering a phase where earnings are expected to grow more rapidly. The Golf Equipment segment is also a strength, with Callaway maintaining a leading market share in U.S. golf clubs and launching innovative products in a sport that continues to attract more participants. The sale of Jack Wolfskin is another positive, as it removes a lower-margin, underperforming asset and allows the company to focus on higher-growth brands like TravisMathew. While there are many things to like about Topgolf Callaway Brands, and the upcoming separation could create value over time, I still believe there are better opportunities in the market. Therefore, I will not be investing in Topgolf Callaway Brands at this time.

My personal goal with investing is financial freedom. It also means that to obtain that, I do different things to build my wealth. If you have some extra hours to spare each month, you can turn a few hours a week into a substantial amount of money in a few years. If you are interested to know how I do it, you can read this post.

I hope you enjoyed my analysis! While I can’t post about every company I analyze, you can stay updated on my trades by following me on Twitter. I share real-time updates whenever I buy or sell, so if you’re making your own investment decisions, be sure to follow along!

Some of the greatest investors in the world believe in karma, and to receive, you will have to give (Warren Buffett and Mohnish Pabrai are great examples). If you appreciated my analysis and want to get some good karma, I would kindly ask you to donate a bit to 10.000 dogs. They rescue street dogs in Thailand by giving them food, medicine and vet care. If you have a little to spare, please donate here. Even a little will make a huge difference to save these wonderful animals. Thank you.