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    CALY
    Earnings call· Jun 2026(Q2 FY26)

    Callaway Golf Q2 FY26 earnings call CALY

    Aug 4, 2026 Source

    Executive summary

    Callaway Golf Company Q2 FY26 — Strong Performance and Strategic Refocusing

    Callaway Golf delivered a strong Q2 FY26, exceeding revenue and adjusted EBITDA expectations, driven by healthy golf market conditions and product strength. The company is successfully executing its transformation into a pure-play golf company, having paid down significant debt and initiated a share repurchase program. While strategic initiatives will impact second-half results, management is confident in long-term margin expansion and shareholder value creation.

    Highlights

    5

    • Q2 revenue was $612 million, up 2% year-over-year, exceeding midpoint guidance by $15 million.

    • Adjusted EBITDA was $125 million, up 36% versus the prior year, exceeding midpoint guidance by $22 million.

    • Gross margin expanded 460 basis points in Q2, reflecting continued progress on margin initiatives.

    • Golf ball revenue was up 15% in Q2, with U.S. market share reaching a record high of over 23%.

    • Repurchased approximately $84 million of stock in H1 FY26, with $120 million remaining authorization.

    Concerns

    4

    • Q3 FY26 net sales are forecast at $415 million to $435 million, reflecting a year-over-year decrease due to launch cadence changes and tougher comps.

    • Q3 FY26 adjusted EBITDA is forecast at $10 million to $20 million, driven by lower revenue, lower dividend income, and cost of living increases.

    • Commodity cost pressures, including tungsten and petrochemicals, continue to impact the business.

    • Strategic initiatives, such as extending product life cycles and rationalizing lower-margin business, will negatively impact H2 FY26 revenue and profit.

    Guidance & targets

    8
    CategoryTargetConfidence
    Full Year 2026 Net Sales
    $2.045 billion to $2.070 billion
    high materiality
    High
    Full Year 2026 Adjusted EBITDA
    $246 million to $260 million
    high materiality
    High
    Q3 2026 Net Sales
    $415 million to $435 million
    medium materiality
    High
    Q3 2026 Adjusted EBITDA
    $10 million to $20 million
    medium materiality
    High
    Full Year 2026 Gross Tariff Expense
    approximately $43 million
    medium materiality
    High
    Full Year 2026 Capital Expenditures
    approximately $40 million
    medium materiality
    High
    Net Cash Leverage Position
    net cash leverage position
    high materiality
    High
    Share Repurchases
    continue to steadily return capital to shareholders at some level
    high materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Golf Equipment
    Net sales increased 4% in Q2, driven by strength across both clubs and balls. The Chrome Tour family and Super Soft franchises resonated with consumers, and the Quantum family of woods and irons received positive market feedback. The company is introducing 'mini spinners' for high-lofted fairways.
    Golf ball revenue: up 15% (Q2)Golf ball revenue: up 8% (H1)June 2026 U.S. golf ball market share: just over 23% (up 250 bps YoY)June 2026 U.S. Oncore golf ball share: just over 24%U.S. year-to-date driver share: approximately 25% (up 110 bps)U.S. year-to-date total wood share: approximately 25% (up 120 bps)
    		—4%—gross margin expansion
    Apparel and Gear
    Net sales decreased 4% in Q2, primarily due to timing of shipments between Q1 and Q2 and FX headwinds in Asia. The Callaway brand performed roughly in line with expectations.
    		—-4%—gross margin expansion
    TravisMathew
    Maintained its strong start to the year and performed slightly ahead of expectations. Consumer response to the women's offering remains positive, and the brand is gaining ground in men's golf. The planned closure of 4 underperforming stores in Q4 FY26 is part of a disciplined approach to optimize the retail fleet.
    Stores to close in Q4 FY26: 4Retail fleet going into 2027: 61 stores
    		—slightly——

    Operational metrics

    21
    Adjusted EBITDA
    $125 millionup 36% versus the prior year
    Q2 FY26

    Exceeded midpoint guidance by approximately $22 million.

    Adjusted EBITDA
    increased 33%increased 33%
    H1 FY26

    Highlighting operating leverage and execution benefits of the more focused golf platform.

    Gross Margin
    48.5%expanded 460 basis points
    Q2 FY26

    Excluding the tariff benefit, Q2 gross margin increased 440 basis points year-over-year.

    Gross Margin
    expanded 360 basis pointsexpanded 360 basis points
    H1 FY26

    Reflects continued progress against margin initiatives and benefits of portfolio actions.

    Operating Expenses
    increased approximately $1 millionless than 1%
    Q2 FY26

    Cost of living increases and inflationary pressures largely offset by corporate cost savings.

    Corporate Overhead Expenses
    decreased $4 million13%
    Q2 FY26

    Primarily due to the company's strategic transformation and related cost savings initiatives.

    Outstanding Debt
    $74 million
    As of June 30, 2026

    Company ended the quarter in a net cash position.

    Cash and Cash Equivalents
    $278 million
    As of June 30, 2026

    Part of total available liquidity.

    Total Available Liquidity
    $775 millioncompared to $1.16 billion at the same time last year, a decrease of $387 million
    End of Q2 FY26

    Consists of cash on hand and availability under credit facilities. Decrease primarily due to cash used for debt paydown of $1.4 billion in H1 FY26.

    Debt Paydown
    $1.4 billion
    H1 FY26

    Included settling $258 million of convertible notes and paying in full the remaining $163 million outstanding under Term Loan B facility.

    Shares Repurchased
    5.9 million shares
    Through June FY26

    Broken down as approximately $42 million in Q1 and approximately $42 million in Q2.

    Share Repurchase Authorization Remaining
    approximately $120 million
    As of June 30, 2026

    Under the current $200 million program.

    Gross Tariff Expense
    $34 million
    FY25

    Full year gross tariff expense in 2025.

    Tariff Refunds Applied For
    approximately $11 million and $32 million, respectively
    N/A

    For Phase 1 and Phase 2 refunds. All Phase 1 refunds received to date.

    Tariff Refunds Received (Phase 2)
    almost $7 million
    N/A

    Part of Phase 2 refunds, with the balance expected in H2 FY26.

    Tariff Refunds Potential (Phase 3)
    almost $7 million
    N/A

    Expected for Phase 3, bringing total refund potential to approximately $50 million.

    GAAP Tariff Refunds Recognized
    $10.8 million
    Q2 FY26

    Recognized on a GAAP basis in Q2, but excluded from non-GAAP results for period-over-period comparability.

    Dividend Income Headwind to Adjusted EBITDA
    approximate $12 millionyear-over-year headwind
    H2 FY26

    Due to excess cash held in H2 last year being used for debt paydown in H1 this year. Net benefit to free cash flow.

    Rounds Played
    up approximately 4%
    Year-to-date through Q2

    Reflects healthy golf participation.

    Golf Equipment Sell-through
    up low to mid-single digits
    Q2 and Year-to-date

    Reflects healthy market conditions.

    TravisMathew Store Closures
    4
    Q4 FY26

    Stores were not hitting financial targets; will leave 61 stores going into 2027.

    Industry KPIs

    7
    MetricValueDetails
    Revenue$612 millionUSD
    Gross margin48.5%%
    Market sharejust over 23% overall%
    Adjusted EBITDA ebita$125 millionUSD
    Cash investments balance$278 millionUSD
    Tariff impact mitigationapproximately $43 millionUSD
    Share buyback capital returnapproximately $84 millionUSD

    Product announcements

    1
    ProductTypeDetails
    Mini Spinnerslaunch

    Deals & partnerships

    2
    Jack WolfskinSale of the Jack Wolfskin business.

    Completed in late May of last year (FY25).

    TopgolfSale of a 60% interest in Topgolf.

    Completed in January of this year (FY26).

    Risks & headwinds

    5
    Commodity Cost PressuresOngoing

    increases in certain commodities and strategic metals such as tungsten, which have increased multiples over 2025 costs; increased petrochemical-based cost pressures, including increased energy costs and raw material costs for golf balls.

    Mitigation: These cost pressures are included in the guidance provided; management is comfortable managing through current levels.

    Strategic Initiatives Impact on H2 Revenue/ProfitH2 FY26

    will negatively impact the back half of this year

    Mitigation: Deliberate, disciplined approach to driving sustainable margin expansion, revenue growth, and stronger free cash flow over time. Includes extending product life cycles (iron launch pushed to next year), rationalizing lower-margin business, and increasing investment in fitting.

    Lower Dividend IncomeH2 FY26

    approximate $12 million year-over-year headwind to adjusted EBITDA

    Mitigation: Net benefit to free cash flow given the higher cost of debt relative to the yield earned on cash, following $1.4 billion debt paydown.

    Foreign Exchange RiskFY26

    approximately $5 million of additional foreign exchange risk

    Mitigation: Reflected as a negative adjustment in the updated full-year revenue guidance.

    Tougher Comparables in H2H2 FY26

    market was up roughly 8% in the second half of last year

    Mitigation: Reflected in guidance; expecting H2 comps for the market to be positive on a 2-year stack basis but a little bit slower than H1.

    What to watch in Q3 FY26

    5

    Gross Margin Improvement Rate

    H2 FY26
    Current460 basis points improvement in Q2
    Targetmeaningfully higher year-over-year, but the rate of improvement will slow down

    Why it matters

    Gross margin expansion is a key profitability driver, and the rate of improvement slowing in H2 due to strategic changes needs monitoring.

    We still expect gross margin to be up meaningfully year-over-year, but the rate of improvement will slow down in the second half versus the first.

    Q&A highlights

    5

    Inquired about the company's decision to lengthen product life cycles and if this is an industry-wide trend in response to inflationary pressures or too much innovation.

    Chip Brewer confirmed the decision to lengthen product life cycles to increase profitability, especially in the iron category. He noted that other companies are making similar decisions, which he believes will be positive for the market long-term by balancing innovation with product profitability.

    “We certainly have taken a look at our launch cadence over the last several years and made the decision to lengthen some of our product life cycles. And this is all in response to our desire to continue to increase the profitability of our business.”

    asked by Simeon Gutman · answered by Oliver Brewer

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Transformation and Capital Structure

    Callaway Golf has completed significant divestitures, including Jack Wolfskin and a 60% interest in Topgolf, to refocus as a pure-play golf company. This transformation involved paying down $1.4 billion in debt, eliminating recourse for Topgolf debt, and initiating a $200 million share repurchase program. These actions have fortified the capital structure, resulting in a net cash position and a clear capital allocation strategy aimed at returning capital to shareholders.

    02

    Healthy Market Conditions and Consumer Resilience

    The golf market continues to demonstrate health and resilience, with U.S. rounds played up approximately 4% year-to-date through Q2. Golf equipment sell-through at key accounts was up low to mid-single digits for both the quarter and year-to-date. Despite dynamic global macroeconomic conditions and increased pricing, the golf consumer remains committed, allowing Callaway to grow its golf equipment revenue faster than the broader market in all major regions.

    03

    Gross Margin Expansion and Profitability Initiatives

    The company achieved significant gross margin expansion, increasing 460 basis points in Q2 and 360 basis points in the first half. This improvement was broad-based across both Golf Equipment and Soft Goods segments, driven by continued progress on margin initiatives, including select price increases, cost reductions, and rationalizing lower-margin business. Management expects continued year-over-year gross margin improvement, albeit at a slower rate in the second half due to strategic launch cadence changes and lower volumes.

    04

    Product Innovation and Market Share Gains

    Callaway's Golf Equipment segment showed strong performance, particularly in golf balls, with Q2 revenue up 15% and U.S. market share reaching a record high of over 23%. In clubs, the Quantum family of woods and irons received positive feedback, contributing to U.S. driver and total wood share of approximately 25%. The introduction of 'mini spinners' for high-lofted fairways further demonstrates the company's commitment to innovation.

    05

    Tariff Dynamics and Mitigation Efforts

    The tariff situation remains dynamic, with new Section 301 forced labor tariffs taking effect. Callaway now expects full-year 2026 gross tariff expense to be approximately $43 million, a net improvement of $7 million compared to prior guidance. The company has received Phase 1 tariff refunds and almost $7 million of Phase 2 refunds, with the balance of Phase 2 and additional Phase 3 refunds expected, totaling approximately $50 million in potential refunds.

    06

    TravisMathew Performance and Retail Optimization

    The TravisMathew brand maintained a strong start to the year, growing slightly in Q2, with positive consumer response to its women's offering and gains in the men's golf category. As part of a disciplined approach to enhance profitability, Callaway plans to close four underperforming TravisMathew stores in Q4 FY26, which will result in a stronger and more profitable retail fleet of 61 stores going into 2027. A charge of approximately $1.5 million for these closures was included in Q2 financials.

    AI-generated summary of the company’s earnings call. Not investment advice.