Callaway Golf Co. 10-Q Summary: Period Ended June 30, 2026
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2026, and the six months ended on that date. Callaway Golf Company operates two primary segments: Golf Equipment (clubs and balls) and Apparel, Gear and Other (TravisMathew, OGIO, and Callaway soft goods). The reporting period reflects the company's strategic realignment following the divestiture of the Topgolf business (60% stake sold effective Jan 1, 2026) and the Jack Wolfskin business (sold May 2025). Results for these divested entities are classified as discontinued operations.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Net Sales | $612.2M | $600.4M | $1,299.7M | $1,230.0M |
| Gross Profit | $306.7M | $263.4M | $633.4M | $547.0M |
| Gross Margin | 50.1% | 43.9% | 48.7% | 44.5% |
| Operating Income | $114.8M | $74.3M | $253.0M | $177.4M |
| Net Income (Continuing Ops) | $75.8M | $45.5M | $150.7M | $108.9M |
| Diluted EPS (Continuing Ops) | $0.40 | $0.24 | $0.78 | $0.56 |
| Cash & Equivalents | $278.1M | $683.5M | $278.1M | $683.5M |
| Total Debt (Net) | $7.7M | $1,416.0M | $7.7M | $1,416.0M |
| Operating Cash Flow (YTD) | $80.5M | -$18.3M | $80.5M | -$18.3M |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 2.0% in Q2 and 5.7% YTD compared to 2025. Golf Equipment sales drove growth, with golf ball sales up 14.8% in Q2 due to the Chrome family launch. Apparel sales declined 3.6% in Q2 but grew 2.4% YTD.
- Margin Expansion: Gross margin improved significantly to 50.1% in Q2 (from 43.9% in 2025) and 48.7% YTD. This was driven by favorable pricing, product mix, cost savings, and the recognition of $10.8M in tariff refunds recorded as a reduction in cost of sales.
- Debt Reduction: The company fully repaid its $1.165B Term Loan B in May 2026, utilizing proceeds from the Topgolf sale and cash on hand. Total debt dropped from $1.416B at year-end 2025 to $7.7M at June 30, 2026.
- Equity Method Loss: The company recognized a $28.7M loss YTD from its remaining 39.3% equity interest in Topgolf, reflecting its share of Topgolf's net losses.
- Stock Repurchases: The company repurchased 2.9 million shares in Q2 2026 for $42.4M under a $200M program authorized in January 2026.
Guidance, Outlook, and Risks
- Outlook: Management expects the "Transformation Plan" (cost optimization) to be substantially complete by the end of 2026, with total expected costs of up to $10.0M. Capital expenditures for 2026 are estimated at approximately $40.0M.
- Tariff Uncertainty: While $10.8M in refunds were recognized in Q2, the company has filed approximately $49.5M in refund claims. Future trade policy and the timing of additional refunds remain uncertain.
- Investment Monetization: The company expects to recognize a gain of approximately $15.3M in Q3 2026 from the sale of its investment in Full Swing Golf Holdings, LLC.
- Risks: Key risks include foreign currency fluctuations (unfavorable impact of $5.1M on Q2 revenue), consumer discretionary spending trends, supply chain disruptions, and the ability to realize synergies from the separation of Topgolf.
Investor Verification Checklist
- Tariff Refund Realization: Verify the status of the remaining ~$38.7M in filed tariff refund claims and the likelihood of future recognition.
- Topgolf Equity Performance: Monitor the financial performance of the retained 39.3% Topgolf stake, which currently contributes significant losses to continuing operations.
- Debt Covenant Compliance: Confirm ongoing compliance with the 2023 ABL Credit Facility covenants, specifically the fixed charge coverage ratio, given the shift in capital structure.
- Inventory Levels: Assess the $518.2M inventory balance against seasonal sales trends to ensure no excess build-up post-peak season.
- Full Swing Sale Closing: Confirm the closing of the Full Swing sale and the recognition of the expected $15.3M gain in Q3 2026.