Callaway Golf Co

Callaway Golf is demonstrating strong performance post the sale of their TopGolf business, with Q1 net sales rising 9.2% to $687.5 million and adjusted EBITDA climbing 31.1% to $163.7 million. The company has also seen a significant increase in non-GAAP net income from continuing operations, which rose by 96%. Management has raised its full-year outlook, indicating a positive trend for the golf industry this summer. Additionally, Callaway has been actively returning capital, having repurchased 5.6 million shares at an average cost of $14.08, and remains in a net cash position after settling $258 million of convertible notes. The thesis continues to play out as management effectively reduces debt and simplifies the business narrative.

Post the announced sale of their TopGolf business, the next catalyst to the story is demonstrating the clean, high-quality business of the remaining club, ball, and apparel business. Q1 net sales rose 9.2% to $687.5m, adjusted EBITDA climbed 31.1% to $163.7 million, and non-GAAP net income from continuing operations increased 96%, with gross margin up roughly 260 basis points, absorbing about $18m of incremental tariff expense. Management raised its full-year outlook, and the summer thus far has been a net positive for the golf industry. Our thesis continues to play out, and while the stock has materially appreciated, we still see upside to numbers.

Callaway's recent transition to a pure-play golf OEM following the sale of its 60% stake in Topgolf has positioned it for significant growth. The $1.1 billion valuation from the sale generated approximately $770 million in net proceeds, allowing management to retire $1 billion of its Term Loan B, strengthening the balance sheet with $680 million in cash against $480 million in gross debt. The board's authorization of a $200 million share repurchase further enhances shareholder value. With the stock trading at an estimated 12x 2027 earnings, the outlook for Callaway is promising as it focuses on golf and buybacks.