Well, friends, it looks like Topgolf Callaway Brands Corp. is calling it quits on the whole "golf gear meets boozy driving range" marriage. After a whirlwind romance that lasted just over three years, they're serving up a divorce that signals Callaway may not be the “millennial/Gen Z” whisperer they aspired to be . 

(Source: Golf Digest) 

The plan? Split into two independent, publicly traded companies, each with its own shiny new identity: Callaway, the OG golf equipment king, and Topgolf, the fast-growing, "weirdly fun but also kind of expensive" golf-themed entertainment venue biz.

(Source: Giphy) 

According to reports, Callaway, the brand that’s been around since your grandpa was hitting the links, will be all about clubs, balls, and lifestyle apparel. You know, the stuff that brings in a casual $2.5 billion in revenue. Meanwhile, Topgolf—the place where people go to pretend they know how to swing a golf club while sipping overpriced cocktails—will focus on its $1.8 billion venue business. 

Oh, and before you ask, you know Toptracer? The nifty little ball-tracking tech that TopGolf used to remind you how absolutely dreadful your ball distance is with your swing? Yeah that’s staying with Callaway. Because apparently, even in breakups, you’ve got to fight over the tech. 

(Source: Restaurant Biz) 

Of course, for those of you who missed it (or blissfully ignored it), Callaway bought Topgolf in 2020 for a cool $2.6 billion in stock. At the time, CEO Chip Brewer was all in, proudly boasting in the financial media that this was indeed the “merger” of the century—a seamless blend of serious golf goods and casual entertainment vibes. "Callaway and Topgolf are just better together," Brewer proclaimed, likely with a twinkle in his eye and daydreams of a massive revenue explosion.

(Source: TopGolf) 

However, fast forward to 2024, and spoiler alert: These two companies, apparently, are NOT better together. Turns out, running a golf equipment biz and a chain of glorified party ranges (who happen to attract the most tire kicker generation of all time - because they're broke af) are two very different beasts. 

(Source: Giphy) 

Which is why, now the suits at Topgolf Callaway have decided that splitting the companies will help both sides "focus" and "optimize capital allocation"—fancy talk for "I’m tired of this Grandpa…"

(Source: Pinterest) 

Brewer even admitted that while Topgolf is a cash cow with "significant future value creation opportunity," it’s got a different operating model and capital structure than Callaway. Translation: Topgolf is a high-maintenance date and Callaway wants something more serious and low-key.

The breakup was announced alongside Topgolf Callaway’s latest earnings report, which was the financial equivalent of “bleh”. Sure, earnings beat expectations, but revenue? Not so much. And Topgolf’s same-venue sales dropped a rather unsexy -8.2%. Corporate events were the real problem, down -27%—because, apparently, even companies are tightening their belts when it comes to taking their employees out for boozy adult mini-golf.

(Source: Yahoo Finance) 

In result, the big separation is slated for the second half of 2025. But before you “How to Be A Stock Market Genius by Joel Greenblatt” folks start eyeing this spinoff as a potential opportunity, here’s how the finances of this split shakeout: First, Callaway (the golf gear side) will keep all of Topgolf Callaway’s whopping $1.2 billion in debt. 

Topgolf, meanwhile, will start its new life debt-free, except for its venue financing obligations. And don’t worry, Topgolf will be sitting on a "significant cash balance" as it scales back on opening new venues because, well, maybe building 50 new driving ranges during tough economic times isn’t the best idea.

(Source: Giphy) 

For instance, while TopGolf currently operates over 100 venues, expansion plans are set to be somewhat chilled down for the time being as the company is only targeting “mid-single digit” openings for 2025. For Callaway though, this is a prodigal son returning to its Boomer roots. The split lets them focus on what they do best—dominating the golf equipment market (aka making our elders look like absolute UNITS on the greens). 

(Source: Giphy) 

As we all know, Callaway’s been killing it in clubs and balls, and they’ve got the top U.S. market share to prove it. Plus, they’ve been quietly building up an "active lifestyle" portfolio with brands like TravisMathew and Ogio, because you know, look good play good, amirite? 

(Source: TopGolf Callaway) 

On the other hand, for TopGolf, the split gives them a chance to double down on what they do best: attracting millennials and Gen Z-ers who couldn’t care less about traditional golf. Topgolf’s business model is simple: combine mediocre golf skills with booze, food, and a party atmosphere, and watch the dollars roll in. The challenge now is to keep that momentum going with fewer new venues and a focus on profitability - but again, with that said, TopGolfs whole business model is built on “fun” discretionary spending.

Meaning, if the economy tanks, or more people decide they’d rather stay home and binge Netflix (or cry because layoffs have surged 193% over the last month) instead of hitting golf balls while plastered out of their mind… Well, things could get rough. 

(Source: Bloomberg) 

In the end though, this spinoff really isn’t that shocking. Trying to combine golf gear and an entertainment venue business was always going to be a bit of a stretch. Especially when you think about the state of mind that TopGolf consumers leave with… 

The last thing they are thinking about is buying new clubs after drinking five beers or trying to hit it off with their dime piece they met at the bar last week. However, now, with the split, both companies can focus on what they do best. Callaway can be the buttoned-up, responsible adult in the room, while Topgolf can keep being the life of the party. Different strokes for different folks, right?

(Source: Giphy) 

Now obviously we’ll see what the future holds for both companies, but given that TopGolf Callaway Brands Corp. is down -28.32% YTD, in theory, this should only help boost bullish sentiment in the long run.

But, but, but…

With that said, that will remain to be seen for quite some time. And while, some may be going to their excel sheets looking for any clues in the numbers for lucrative spots to execute a potential buy on…

(Source: Giphy) 

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(Source: Giphy) 

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Stocks.News holds positions in Netflix as mentioned in the article.