Topgolf's Leverage Declines: How Is Financial Flexibility Shaping Up?

Topgolf Callaway Brands Corp. MODG exited the third quarter of 2025 with a noticeably stronger balance sheet, reflecting improved liquidity and reduced leverage following solid year-to-date cash generation and the sale of the Jack Wolfskin business. While recent attention has centered on operating trends at Topgolf and cost pressures tied to tariffs, the company’s third-quarter results point to steady progress in its capital structure.

Liquidity expanded meaningfully by the end of the third quarter of 2025. Available liquidity rose to $1.25 billion, an increase of nearly $400 million year over year, supported by higher operating cash flow generated year to date and proceeds from the sale of the Jack Wolfskin business. Cash generation through the first nine months of 2025, combined with improved working capital and lower net capital expenditures, allowed the company to strengthen its cash position while continuing to support ongoing operations.

This improvement translated into lower leverage on a year-over-year basis. Net debt declined to $2.23 billion at quarter-end, down from $2.54 billion a year earlier, driving net leverage down to 3.8x from 4.6x. On a REIT-adjusted basis — which incorporates venue rent and interest obligations tied to Topgolf locations — leverage improved more sharply, falling to 1.4x from 2.4x. Management indicated comfort with these leverage levels, suggesting reduced balance sheet strain compared with recent periods.

Looking ahead, external pressures remain part of the financial backdrop, particularly tariff-related cost headwinds expected to extend into 2026. However, stronger liquidity and lower leverage provide a more stable foundation as the company continues to evaluate strategic alternatives for the Topgolf business. As balance sheet metrics and financial flexibility improve, capital structure dynamics are likely to become a more stable element of the company’s overall financial profile.

MODG’s Price Performance, Valuation & Estimates

Shares of MODG have gained 53.4% in the past six months compared with the industry’s 4.2% rise. In the same time frame, shares of other companies like Acushnet Holdings Corp. GOLF have gained 11.4%, while American Outdoor Brands, Inc. AOUT has declined 3.5%.

Price Performance

MODG is currently trading at a discount compared with the industry, with a forward 12-month price-to-sales (P/S) ratio of 0.65. Conversely, industry players, such as Acushnet Holdings and American Outdoor, are trading at a P/S ratio of 1.97 and 0.56, respectively.

P/S (F12M)

The Zacks Consensus Estimate for MODG’s 2026 loss estimate has narrowed in the past 60 days.

MODG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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